UC-NRLF 


T  K 


277    IbD 


HYDRO -ELECTRIC 
DEVELOPMENTS 


PLAYER 


LIBRARY 

OF  THE 

UNIVERSITY  OF  CALIFORNIA. 

Class 


Published   by  the 

Me  G  raw  -  H  ill    E>  ook.  Comp  any 

Ne^vYork 

.Successors  to  the  BookDepartments  of  the 

McGraw  Publishing  Company  Hill  Publishing  Company 

Publishers   of  Books  for 

Elec  trical  World  The  Engineering  and  Mining  Journal 

The  Engineering  Record  R>wer  and  The  Engineer 

Electric  Railway  Journal  American    Machinist 

ffiTgiirirfiTTggffirffTirririuiTirgfirffjirjgirrTginTJTTB-TirirjTTffirTTfJTinrfirirrirgTTfTgirv 


NOTES 

ON 

HYDRO-ELECTRIC 
DEVELOPMENTS 


BY 


PRESTON   PLAYER 

»  I 


NEW  YORK 

McGRAW  PUBLISHING  COMPANY 

239  West  39th  Street 

1908 


Copyrighted,  1908 

by  ..  , 

McGRAW  PUBLISHING   COMPANY 
NEW  YORK 


PREFACE. 

The  interest  which  has  been  manifested  by 
investors,  capitalists  and  bankers  in  schemes  for 
utilizing  water  powers  has  created  a  demand  for 
a  general  treatment  of  the  subject,  which  deals 
particularly  with  the  commercial  side  of  such  enter- 
prises. Many  water  powers  have  undoubtedly 
been  developed  without  giving  sufficient  con- 
sideration to  the  subject  or  the  principles  involved, 
but  enough  developments  have  been  made  to 
furnish  data  which  may  be  made  use  of  in  the 
future.  It  is  therefore  the  object  of  this  short 
discussion  to  indicate,  as  far  as  possible,  the  in- 
formation wl  .  Li»iibe  obtained  in  order  to 
afford  a  definite  basis  for  forming  a  decision  as  to 
the  merits  of  any  proposed  undertaking.  The 
idea  is  to  treat  the  subject  from  a  different  point 
of  view  from  the  one  usually  taken  and  to  avoid 
as  far  as  possible  a  discussion  of  principles  of  engi- 
neering which  have  been  very  thoroughly  worked 
out  and  treated  by  a  number  of  writers  of  ability. 

Let  us  assume  therefore  that  good  engineering 
advice  may  be  obtained  and  we  may  determine 
with  fair  accuracy  the  possibilities  of  utilizing  the 
power  for  commercial  purposes. 

The     first    information,     therefore,     which    we 

desire   to   obtain   is:     What   will   be   the   cost   of 

making  the  development?  and:     What  will  be  the 

receipts  which  we  may  expect  from  the  under- 

iii 


196480 


iv          HYDRO-ELECTRIC  DEVELOPMENTS. 

taking?  The  answer  to  the  first  question  can 
probably  be  obtained  by  engineers  with  commercial 
accuracy.  The  answer  to  the  second  question,  is 
usually  only  obtained  by  an  extended  examination 
of  the  market  in  \vhich  we  desire  to  dispose  of  our. 
product.  Since  the  price  at  which  electric  energy 
is  sold,  is  dependent  upon  the  cost  of  generating 
the  same,  it  is  of  first  importance  to  determine 
the  cost  of  producing  electric  energy  by  the  cheap- 
est method  which  is  now  in  use  or  may  be  used 
in  the  locality  which  we  desire  to  serve.  Having 
secured  this  information  we  are  in  a  position  to 
compute  the  price  at  which  the  water  power  com- 
pany must  sell  energy  to  the  various  classes  of 
consumers.  The  science  of  generating  electric 
energy  has  progressed  to  such  a  degree  that  one 
must  realize  pretty  thoroughly  what  competition 
means,  before  "engaging  in  a  water-power  enter- 
prise. I  have  tried  to  present  the  subject  in  such 
a  manner,  that  anyone  with  the  help  of  men  who 
have  given  special  attention  to  the  various  prob- 
lems involved,  may  form  a  judgment  of  chances  of 
profit  which  may  be  expected  from  an  undertaking. 

P.  P. 
Boston,  June  1,  1908. 


CONTENTS. 

CHAPTER  I. 

Preliminary  Determinations j. 

CHAPTER  II. 

Methods  of    Procedure 5 

CHAPTER  III. 

Engineering  Examination 9 

CHAPTER  IV. 

The  Extent  of  the  Market  for  Energy 13 

CHAPTER  V. 

Cost  of  Energy  Manufacture 18 

CHAPTER  VI. 

Central  Station  Economics 26 

CHAPTER  VII. 

Sale  of  Electric  Energy .  39 

CHAPTER  VIII. 

Primary  and  Secondary  Powers 49 

CHAPTER  IX. 

Capital  Costs 59 


OF    THE 

UNIVERSITY 

OF 


Notes  on  Hydro-Electric 
Developments. 

CHAPTER  I. 
PRELIMINARY  DETERMINATIONS. 

The  proposition  to  develop  a  water  power  at  a 
given  place,  is  very  often  originated  by  an  active 
minded  inhabitant  of  the  region  where  the  power 
is  situated.  The  promoter  usually  is  joined  by  a 
contractor,  who  desires  to  do  the  construction 
work  and  these  two  set  out  to  interest  capital  in 
the  enterprise. 

The  subject  is  brought  to  the.  attention  of  the 
banker  or  capitalist  in  various  degrees  of  com- 
pletion. Sometimes  the  idea  only  is  presented. 
Sometimes  certain  rights  of  more  or  less  value  have 
been  secured  with  a  general  idea  of  controlling  the 
situation.  The  plan  may  be  legitimate  and  war- 
rant further  investigation  or  it  may  appear  at 
first  sight  entirely  impractical.  The  value  of  the 
work  which  has  been  done  and  the  value  of  the 
rights,  if  any,  which  have  been  secured,  are  often 
very  much  exaggerated  in  the  minds  of  the  pro- 
moters, but  after  frequent  repetition  to  less  in- 
terested listeners  their  ideas  begin  to  assume  more 
rational  proportions.  If  the  scheme  is  worth 
investigating  at  all,  the  first  thing  which  we  desire 
to  know  is: 

1 


2  HYDRO-ELECTRIC  DEVELOPMENTS. 

I.  What    is    the    actual    property    offered    for 
sale  and  at  what  price  ? 

Has  any  real  lien  been  secured  which  gives  the 
promoters  anything  to -sell  or  simply  are  we  asked 
to  buy  a  more  or  less  indefinite  idea? 

Secondly  we  must  find  out: 

II.  What  land    if    any  has  been  purchased  or 
placed   under   option   and   what   water   rights   are 
included  in  the  purchase  or  option  ? 

From  these  two  questions  it  is  generally  easy  to 
form  an  idea  of  the  worth  of  the  work  which  has 
been  done. 

III.  The  information  which  we  wish  to  secure 
next  is  as  to  the  height  of  the  fall  which  occurs  at 
the    site    of    the    proposed    development    and    the 
distance  in  which  this  fall  takes  place. 

From  this  information  we  should  be  able  to  form 
a  very  general  idea  as  to  whether  the  development 
which  will  utilize  the  flow  of  stream  will  be  an 
expensive  or  inexpensive  one  to  make. 

It  of  course  being  the  general  presumption  that 
if  the  fall  occurs  in  a  long  distance,  the  necessary 
construction  work  to  utilize  the  water  will  be 
much  more  expensive  than  if  the  fall  occurs 
abruptly. 

IV.  The  previous  questions  as  to  the  character 
of  the  stream,  generally  bring  up  the  subject  as 
to  what  flowage  rights  are   included  in  the   title 
to  the  property  which  it  is  desired  to  use. 

V.  Since  the  flow  of  streams  is  of  a  very  variable 
nature,  varying  as  to  months  and  years,  it  is  im- 


PRELIMINARY  DETERMINATIONS.  3 

portant  to  know  whether  any  gaugings  of  the  river 
have  been  made  and  if  so  by  whom  and  for  how 
long  a  period.  If  these  records  have  been  kept  in 
a  systematic  manner  we  must  of  course  have  this 
information. 

VI.  Assuming   that   the   sight   of   the   proposed, 
development  is  adjacent  to  a  market  where   the 
energy  can  be  sold,  we  must  know  what  is  the 
estimated    cost    of    development    and    the    former 
experience  of  the  persons  making  the  estimates. 

VII.  As  affecting  the  sale  of  the  energy,  we  must 
learn  what  is  the  nearest  power  that  has  been  de- 
veloped upon  this  or  any  other  river.     If  a  power 
has  been  developed  upon  the  one  in  which  we  are 
interested,    we    must    investigate    why    the    other 
site  was  chosen  rather  than  the  one  now  under 
consideration. 

VIII.  In  addition  to  knowing  what  powers  have 
been    developed   we    must   endeavor   to    ascertain 
what  power  may  be  developed,  which  will  come 
into  competition  with  the    scheme  which    is    sub- 
mitted to  us. 

IX.  If  a  power   has  been   developed   above   or 
below   the    site    which    we    are    contemplating,    it 
may  materially  affect  our  plans,  either,  on  account 
of  the  other  company  holding  back  water  or  our 
backing  up  water  on  our  neighbors  wheels. 

X.  The  Government  Reports  should  be  one  of 
the  first  sources  of  information  consulted  in  check- 
ing up  the  information  which  has  been  presented. 

XL  Having  made  ourselves  certain  that  a  power 


4  HYDRO-ELECTRIC  DEVELOPMENTS. 

may  be  developed  at  a  reasonable  cost,  and  that 
there  will  be  a  market  for  the  energy,  we  must 
start  the  preliminary  examinations  which  will 
furnish  information  upon  which  to  base  more 
definite  conclusions. 


CHAPTER  II. 
METHODS  OF  PROCEDURE. 

When  it  has  been  decided  that  the  enterprise 
warrants  further  investigation  and  expense,  it 
is  generally  customary  to  get  a  sufficient  hold  upon 
the  promoters  or  vendors  so  that  the  proposition 
may  be  taken  up  advantageously  should  the 
examinations  indicate  it  to  be  of  value.  The  first 
step  is  to  obtain  some  definite  understanding  as 
to  the  value  of  the  work  already  done.  This 
usually  is  rather  difficult  and  is  subject  to  many 
differences  of  opinion.  The  ideas  which  pro- 
moters have  are  as  numerous  as 'the  sands  of  the 
sea  and  the  importance  of  their  own  work  is 
usually  very  much  overrated.  They  usually  pro- 
pose that  the  investor  puts  up  all  the  money,  takes 
all  the  risk,  and  divides  with  them  the  profits, 
if  any  are  made  in  the  enterprise. 

A  fair  way,  to  arrive  at  a  settlement  however, 
is  to  call  for  a  statement  of  the  money  already 
expended  and  the  amount  of  the  time  which  has 
been  spent.  A  price  should  be  set  upon  all  the 
work  which  has  been  accomplished,  and  the  pro- 
moters should  give  the  banker  an  option  upon  the 
property  for  a  sufficient  length  of  time  to  allow 
him  to  make  such  investigations  as  he  may  think 
are  necessary  to  satisfy  himself  of  the  merit  of  the 
undertaking. 

The  consideration  for  the  option  is  that  the 
5 


6  HYDRO-ELECTRIC  DEVELOPMENTS. 

banker  will  undertake  the  examination  and  pro- 
ceed with  due  diligence.  If  the  scheme  is  of  any 
value  the  information  thus  gained  would  be  of 
advantage  to  the  promoters,  even  though  the 
banker  should  not  care  to  carry  out  the  enterprise. 
The  investigators  are  to  be  allowed  to  cease  work 
at  any  time  they  may  decide  to  drop  the  matter, 
in  which  case  any  additional  rights  secured  are 
to  be  turned  over  to  the  promoters.  Should  the 
bankers  decide  that  the  proposition  is  a  meritorious 
one  and  desire  to  proceed  with  the  development, 
they  are  to  have  all  existing  rights  and  property 
turned  over  upon  payment  of  the  stipulated  sum. 
The  following  is  a  suggestion  of  the  general  points 
to  be  covered  in  an  option: 

Statements  and  Agreements  of  the  Vendor. 
I.    Authority  to  sell  from  whom  derived. 

(A)  Agreement  as  to  date  and  place  of 
transfer. 

(B)  Guarantee     of     ability     to     transfer 
property  upon  a  given  date. 

II.    Terms  of  sale. 

(A)    Disposition  of  cash  on  hand. 
III.    A    complete    description  '  of    the    physical 

property. 
(A)   Guarantee    of   condition    at    date    of 

transfer. 
IV.    Statements  regarding  legal  conditions. 

(A)  Organization  of  company. 

(B)  Titles  to  property. 

(C)  Franchises. 


METHODS  OF  PROCEDURE.  7 

V.    Agreements  regarding  legal  matters. 

(A)  Pending  suits  and  claims. 

(B)  Future    suits    arising    from    acts    of 
vendor  prior  to  date  of  transfer. 

(1)   Provision  for  giving  bond  to  hold 

purchaser  harmless. 
VI.    Statements  regarding  financial  condition. 

(A)  Cash  on  hand. 

(B)  Inventory  of  supplies. 

(C)  Materials  ordered  but  not  paid  for. 

(D)  Assets. 

(E)  Liabilities. 

(F)  Earnings. 

(1)  Gross. 

(2)  Net. 

VII.    Agreements  regarding  management  of  prop- 
erty until  date  of  transfer. 

(A)  Under  whose  authority. 

(B)  At  whose  profit. 

(C)  At  whose  risk. 

VIII.    Agreements  as  to  meetings  of  directors  prior 

to  date  of  transfer. 

(A)   Date  of  resignation  of  officers. 
IX.    Agreements  and  statements  to  be  binding 

on  heirs  and  assigns. 

The  attorneys  who  are  to  have  charge  of  the 
legal  work  should  if  possible  have  done  work 
before  of  a  similar  character,  as  they  are  called 
upon  as  soon  as  the  general  investigation  starts, 
to  examine  the  laws  relative  to  the  sale  and  dis- 
tribution of  water  power  and  electric  energy.  An 


8  HYDRO-ELECTRIC  DEVELOPMENTS. 

examination  should  be  made  at  once  of  all  water 
and  flowage  rights  that  have  been  acquired  or  which 
it  is  anticipated  will  have  to  be  obtained.  The 
owners  of  all  property  to  be  hereafter  acquired 
must  be  looked  up,  and  the  laws  relating  to  the 
acquisition  of  land  to  be  used  for  private  rights  of 
way  for  pole  lines  must  be  carefully  considered. 
The  work  of  obtaining  franchises  in  the  localities 
where  power  is  to  be  distributed  must  be^started 
and  the  provisions  of  the  franchises  already  ob- 
tained examined. 


CHAPTER  III. 
ENGINEERING  EXAMINATION. 

A  preliminary  examination  by  electrical  and 
hydraulic  engineers  is  usually  made  to  check  up 
the  data  which  has  been  submitted,  to  establish 
the  amount  of  power  available  at  all  times  and  the 
cost  of  developing  the  same.  The  work  is  usually 
divided  into  two  divisions,  a  hydraulic  engineer 
having  charge  of  determining  the  flow  of  the  stream 
and  making  preliminary  plans  for  the  reservoirs, 
dams,  etc.,  an  electrical  engineer  working  out  the 
problems  of  installation,  transmission  and  distri- 
bution. As  was  previously  pointed  out  it  is  not 
the  purpose  of  this  discussion  to  describe  in  detail 
the  methods  already  perfectly  well  known  for  ob- 
taining this  information.  So  that  only  a  very 
general  outline  will  be  given. 

Since  a  stream  drains  a  certain  natural  territory 
the  extent  of  the  water-shed  has  a  great  bearing 
upon  the  amount  of  flow  and  its  regularity.  The 
engineering  report  therefore,  must  contain  maps 
showing  the  position,  character  and  extent  of  the 
water-shed. 

The  water  which  falls  upon  the  water-shed,  runs 
into  the  streams,  runs  into  the  ground  and  evapo- 
rates. It,  therefore  becomes  important  to  secure 
all  the  available  information  as  to  the  rainfall, 
run  off  and  evaporation.  This  information  can 
usually  be  best  presented  in  the  form  of  tables. 

9 


10         HYDRO-ELECTRIC  DEVELOPMENTS. 

The  records  of  flow  of  many  rivers  have  been  kept 
for  a  number  of  years  and  this  data  if  available 
together  with  all  confirmatory  gaugings  must  be 
presented  in  tabular  form. 

Frequently  it  happens  that  the  older  residents 
in  the  neighborhood  of  rivers  have  marks  which 
more  or  less  accurately  record  the  height  to  which 
rivers  have  risen  upon  this  or  that  occasion.  This 
information  is  of  value  in  assisting  us  to  form 
ideas  of  the  happenings  in  the  past. 

The  tables  showing  the  amount  of  water  which 
will  pass  over  the  dam  may  indicate  that  if  it  were 
possible  to  supplement  the  flow  of  the  stream 
during  certain  months  in  the  year,  a  much  greater 
amount  of  power  would  be  available.  In  this 
event  it  is  useful  to  prepare  statistics  showing  the 
quantity  of  water  which  would  have  to  be  added 
to  the  stream  each  day  to  produce  the  power  which 
we  desire  to  obtain. 

If  it  is  possible  to  store  the  water  by  building 
reservoirs  these  tables  furnish  us  with  certain  in- 
formation as  to  their  size,  etc.  It  may,  however, 
be  imprcaticable  to  furnish  the  water  at  the  de- 
sired times  so  that  a  set  of  tables  which  show  how 
much  mechanical  power,  such  as  steam  power, 
must  be  installed  to  supplement  the  river  flow 
may  have  to  be  prepared. 

The  stream  may  be  susceptible  of  various  degrees 
of  development  so  that  the  desired  information 
usually  calls  for  a  good  deal  of  painstaking,  in- 
vestigation and  the  preparation  of  maps  and  plans 


ENGINEERING  EXAMINATION  11 

which  show  the  details  of  the  different  aspects 
of  the  development.  What  the  engineers  desire 
to  ascertain  is  the  best  development  which  the  coun- 
try will  afford.  The  best  meaning  the  greatest  num- 
ber of  useful  horsepower  for  the  fewest  dollars  of 
investment.  It  may  be  found  before  the  examina- 
tion has  progressed  very  far  that  the  cost  of  the 
work  will  be  more  than  it  is  wise  to  expend,  but 
providing  the  project  is  feasible  what  we  desire  to 
determine  is  the  average  cost  per  horsepower  for 
all  rational  developments.  Later  in  this  pamphlet 
will  be  discussed  how  much  it  is  wise  to  pay  to 
make  any  installation. 

In  considering  questions  involving  water  power 
the  engineer  is  not  dealing  with  an  exact  science. 
There  may  be  at  hand  satisfactory  records  of  rain- 
fall, flow,  etc.,  yet  we  are  of  course  making  our  first 
important  assumption  when  we  consider  that  the 
history  of  the  past  will  be  an  accurate  guide  as  to 
what  may  take  place  in  future. 

If  it  is  advantageous  to  construct  an  expensive 
dam  to  utilize  the  river  flow  there  must  even  in 
the  best  designed  structures  be  a  certain  element 
of  risk. 

The  failure  of  a  dam  may  occur  in  one  of  the 
following  ways: 

1.  Dam  sliding  down  stream. 

2.  Dam  overturning. 

3.  Dam  springing  a  leak. 

4.  Water  changing  channel  and  cutting  around 
end  of  dam. 


12         HYDRO-ELECTRIC  DEVELOPMENTS. 

5.  Water  undermining  dam. 

6.  Insufficient  spill  way. 

The  position  which  the  dam  is  to  occupy  in  a 
stream  is  consequently  very  important  and  must 
be  chosen  with  extreme  care.  It  is  therefore 
essential  to  obtain  an  accurate  idea  of  the  founda- 
tion upon  which  the  dam  will  rest,  before  a  definite 
estimate  of, the  cost  of  the  structure  is  made.  Plans 
giving  the  general  design  of  the  power  plant  and 
machinery  and  the  method  of  power  transmission 
are  necessary  in  the  preliminary  considerations, 
as  they  are  used  as  a  basis  of  estimating  costs. 
Upon  the  results  of  the  information  obtained  in 
this  examination  will  depend  very  largely  the 
decision  as  to  whether  the  proposition  is  one  which 
is  likely  to  show  enough  margin  of  profit  if  de- 
veloped, to  assure  us  that  the  money  which  we 
are  to  spend  for  further  examination  will  be 
justified.  If  the  reports  are  favorable  we  are  now 
ready  to  make  a  detailed  examination  of  the 
market. 


CHAPTER  IV. 
THE  EXTENT  OF  THE  MARKET  FOR  ENERGY. 

The  examination  of  the  market  for  energy  is 
made  to  determine  first,  the  amount  of  power 
which  is  being  used,  second  the  number  of  hours 
per  day  the  power  is  employed.  Third,  the  cost 
of  producing  energy  for  the  uses  which  are  being 
made  of  it.  In  supplying  energy  the  water  power 
company  may  have  to  compete  with  energy  fur- 
nished by: 

1.  Steam  engines. 

2.  Gas  engines. 

3.  Oil  engines. 

4.  Electric  light  companies. 

5.  Street  railways  companies. 

6.  Other  water  powers. 

The  first  step  therefore,  is  to  make  a  detailed 
canvas  of  the  existing  consumers  and  tabulate  the 
results  of  the  examination  (see  table  page  14.) 

In  considering  the  question  of  selling  energy 
the  number  of  hours  it  is  to  be  used  each  day 
becomes  a  very  important  question.  The  reason 
for  this  is  that  the  saving  in  generating  electric 
energy  by  water  rather  than  by  fuel,  is  mainly 
the  cost  of  the  fuel  saved.  If  the  energy  is  used 
for  but  a  few  hours,  the  saving  of  course  is  not  so 
great  as  if  it  were  used  continuously.  Moreover 
if  the  cost  of  the  water  power  installation  is  much 
more  per  horsepower  than  the  cost  of  the  steam 

13 


14 


HYDRO-ELECTRIC  DEVELOPMENTS. 


machinery  the  excess  of  interest  charges  upon  the 

water  power  plant  may  more  than  outweigh  the 

saving  in  fuel  so  that  steam  may  be  the  cheaper. 

In    order    to    determine    therefore    how    much 


Hours 
duration 
of  load 

Average 
hp. 

Peak 

hp. 

Character 
of   load 

Time  of" 
day  of 
Maximum 
load 

Electric      Light 
Cos'.  . 

Street  Railways 

Manufactories 
using  

over  100  hp  

over  50  hp  

over  25  hp  
over  5  hp.     .    . 

Office  Buildings 

City  Lighting.  . 

Com  m  e  r  c  i  a  1 

Lighting  

Railroad    Com- 

panies   
etc.,  etc  

business  may  be  obtained,  we  must  prepare  some 
estimates  of  the  cost  of  generating  energy  for  vari- 
ous uses.  Let  us  see  what  conditions  we  will 
have  to  meet :  First  of  all  there  is  usually  a  certain 
time  in  the  day  when  every  one  wants  power  or 


MARKET  FOR  ENERGY.  15 

light.  In  northern  localities  this  time  varies 
according  to  the  different  seasons.  As  the  fac- 
tories are  running  and  using  power  at  five  o'clock, 
in  winter,  owing  to  the  shortness  of  the  day  the 
lamps  are  turned  on  and  the  people,  in  the  stores 
and  houses  are  also  forced  to  use  artificial  light. 
There  is,  therefore,  thrown  on  the  station  at  this 
time,  what  is  called  a  "  peak  load."  Of  course, 
the  station  or  power  company  is  forced  to  supply 
machinery  to  take  care  of  this  demand.  Some 
of  the  machinery  which  is  in  use  at  this  time  of 
day  may  remain  idle  all  the  remainder  of  the 
twenty-four  hours.  Since  the  interest  upon  the 
money  invested  in  this  machinery  and  the  con- 
tingent expenses  are  a  very  large  amount  com- 
pared with  the  cost  of  generating  the  energy  for 
say  two  or  three  hours,  it  becomes  very  important 
to  the  power  company  furnishing  electric  light  to 
know  when  and  how  long  a  customer  is  to  use  the 
current. 

There  are,  on  the  other  hand,  customers  who 
use  the  energy  continuously  all  day;  some  use  it 
only  intermittently.  All  these  questions  have  an 
important  bearing  upon  what  it  costs  the  con- 
sumer for  his  energy  and  what  it  will  cost  the 
power  company  to  supply  it.  Another  phase  of 
the  question  becomes  apparent  upon  analysis  and 
that  is,  that  it  is  often  profitable  to  furnish  two  or 
more  custcmers  neither  of  whom  would  be  profit- 
able alone. 

Before  proceeding  to  discuss  the  cost  of  manu- 


16         HYDRO-ELECTRIC  DEVELOPMENTS. 

facture  of  energy  it  may  be  of  interest  to  quote 
from  the  twelfth  census  of  the  United  States, 
Volume  VII,  Part  I,  Chapter  IV. 

"  Of  the  total  power  used  in  Manufactures  dur- 
ing the  census  year,  steam  engines  furnished 
8,742,416  horsepower  or  77.4  per  cent,  of  the 
aggregate;  water  wheels  supplied  1,727,258  horse- 
power or  15.3  per  cent.;  electric  motors  311,016 
horsepower  or  2.7  per  cent.;  gas  and  gasoline 
egnines  143,850  horsepower  or  1.3  per  cent.,  and 
other  forms  of  mechanical  power  54,490  horse 
power  or  four- tenths  of  1  per  cent."  We  find 
that  there  were  employed  in  the  United  States 
the  following  amounts  of  power: 

Per  cent,  of 

Amounts.  increase. 

1870  2,346,142    horsepower 

1880  3,410,837  45.3 

1890  5,954,655  "  74.5 

1900  11,300,081  "  89.7 

These  last  figures  are  furnished  to  show  the 
manner  in  which  the  power  is  generated  and  the 
remarkable  growth  which  is  taking  place.  An 
indication  of  some  of  the  possibilities  of  the  future 
is  as  follows:  Census  Report,  reference  same  as 
above. 

'  The  modern  office  building,  often  housing  a 
population  equal  to  a  small  town,  is  almost  wholly 
a  creation  of  the  past  ten  years  and  the  power  re- 
quired in  these  great  structures,  not  only  for 


MARKET  FOR  ENERGY,  17 

lighting  purposes,  but  for  the  operation  of  elevators, 
pumping  water,  compressing  air,  and  operating 
refrigerating  and  ventilating  machinery,  forms  a 
large  item  when  the  number  of  these  buildings  in 
the  United  States  is  taken  into  consideration." 


CHAPTER  V. 
COST  OF  ENERGY  MANUFACTURE. 

Since  it  has  been  shown,  that  the  load  upon  a 
power  plant  varies  at  different  times  in  the  day, 
we  find  that  this  variation  is  a  very  important 
subject.  The  extent  of  the  variation  is  measured 
by  what  is  known  as  a  load-factor  and  is  usually 
taken  for  a  24-hour  day.  It  is  defined  as  follows: 
The  ratio  of  the  average  load  to  the  maximum  load. 
Let  us  see  how  this  information  is  arrived  at. 
Meters  have  been  invented  which  measure  the 
kilowatt-hours  which  have  been  consumed.  The 
kilowatt-hours  may  be  compared  \vith  the  cubic 
feet  of  gas  or  water  at  a  certain  pressure,  and  may 
be  changed  to  horsepower-hours  by  a  very  simple 
arithmetical  calculation.  If  we  divide  the  con- 
sumption of  energy,  measured  in  horsepower 
hours,  during  24  hours  by  the  maximum  horse- 
power load  on  the  plant  multiplied  by  24,  we  ob- 
tain a  fraction  or  decimal  which  is  known  as  the 
load-factor.  If  the  load  were  very  steady  during 
the  entire  24  hours  the  load-factor  would  approach 
unity  or  one.  Since,  however,  energy  is  used  for 
different  purposes  and  in  different  ways  different 
plants  have  different  load-factors.  It  is,  therefore, 
perfectly  conceivable  that  the  load  of  two  or  more 
plants  may  be  of  such  a  character  that  if  one  large 
plant  should  undertake  to  supply  the  other  plants 
that  load  upon  the  large  plant  would  be  more 

18 


COST  OF  ENERGY  MANUFACTURE.          19 

nearly  even  than  upon  any  of  the  individual  plants. 
As  a  matter  of  fact  this  maybe  brought  about,  more 
or  less,  by  the  selection  of  one's  customers. 

Engines  in  many  factories  have  very  varying 
loads  and  are  operated  consequently  under  unfavor- 
able conditions.  An  engine  must  be  capable  of 
taking  care  of  the  maximum  load  which  it  may  be 
called  upon  to  carry,  with  the  result  that  it 
may  be  running  most  of  the  time  very  much 
under  loaded.  Since  the  engine  does  not  work 
constantly  at  its  maximum  efficiency,  the  coal 
consumption  per  horsepower-hour  is  generally 
much  larger  than  would  be  the  case  were  the 
engine  running  at  its  normal  load. 

It  is  obviously  misleading  therefore  in  calculating 
the  cost  of  running  an  engine,  to  take  as  a  basis 
of  estimate  the  number  of  pounds  of  coal  consumed 
by  engines  in  tests  under  favorable  loads  with 
expert  firemen,  etc. 

We  generally  see  in  regulations  for  tests  rules 
for  having  the  fire  appear  in  this  or  that  manner 
before  the  test  and  for  producing  the  same  result 
at  the  end  of  the  run.  The  coal  of  course  being 
weighed  during  the  test.  The  information  so 
derived  has  many  uses,  but  the  average  fireman 
in  a  factory  which  runs  eight  to  ten  hours,  builds 
up  his  fire  from  the  bank  of  the  night  before  and 
closes  the  day's  run  with  everything  going  full 
blast.  Afterwards  he  fixes  and  banks  his  fires  for 
the  next  day's  run,  all  of  which  consumes  coal. 

The  company  which  supplies  energy  to  a  num- 
ber of  small  users  gains  greatly  over  the  small 


20         HYDRO-ELECTRIC  DEVELOPMENTS. 

producer,  in  that  as  the  number  of  users  increases 
the  combined  load  becomes  more  nearly  steady 
and  consequently  the  company's  machinery  may 
work  at  better  efficiency.  The  idea  of  a  number 
of  small  units  tending  towards  constancy  is  similar 
to  the  theory  that  a  bank's  deposits  are  subject 
to  less  fluctuations  as  the  number  of  small  de- 
positors increases. 

Again,  in  furnishing  electric  energy  it  has  been 
found  that  if  we  are  to  supply  a  number  of  motors 
of  from  one  to  25  hp.  capacity,  that  the  chances 
of  all  the  maximum  loads  occurring  at  the  same 
time  become  very  small  and  that  we  need  only 
provide  a  generator  to  furnish  current  to  these 
motors  of  J  the  sum  of  their  maximum  demands. 
In  supplying  current  to  motors  of  from  200  to  300 
hp.  in  size  we  are  generally  required  to  make  a 
provision  for  0.5  the  maximum  connected  load  to 
full  maximum  connected  load,  according  to  the 
duty  which  the  motors  perform.  A  power  plant, 
therefore,  has  very  marked  advantages  over  the 
small  power  producer,  in  that, 

1st.  The  capacity  of  the  generating  units  is 
less  than  the  sum  of  the  individual  maximum  de- 
mands of  the  motors. 

2nd.  The  efficiency  of  the  unit  generating  the 
power  supply  is  greater  in  that  the  load  can 
generally  be  better  apportioned  to  its  requirements. 

3rd.  There  are  other  savings  which  can  be 
effected  in  producing  power  in  large  quantities 
in  that  the  expenses  do  not  increase  in  direct  pro- 
portion to  the  size  of  the  units. 


COST  OF  ENERGY  MANUFACTURE.          21 

Let  us  first  consider  what  it  costs  a  manufacturer 
having  a  200  hp.  engine  to  generate  energy.  We 
will  take  this  case  under  the  supposition  that  if 
we  can  sell  this  man  electric  energy  we  shall  be 
able  to  supply  factories  using  less  than  this  amount. 

Upon  looking  over  the  factory  we  find  we  will 
say  that  energy  is  being  generated  by  a  modern 
direct-connected  engine  and  generator  supplying  a 
number  of  individual  motors.  We  take  this  case 
since  the  energy  is  being  generated  at  less  cost  than 
would  be  the  case  were  belts  used  in  driving  shaft- 
ing. We  find  that  one  fireman  and  one  engineer 
in  charge  of  the  electrical  plant,  are  employed. 
Steam  is  used  during  the  winter  months  to  heat 
the  factory.  An  appraisal  of  the  plant  upon  a 
horsepower  basis  would  probably  show  the  cost 
to  be  as  follows: 

Cost    per 
horse- 
power. 

Engine  and  generator $50. 00 

Switchboard  and  wiring 10. 00 

Boiler  and  piping 15 . 00 

Erecting  plant 10.00 

Foundations 7 . 00 

Feed  pumps. . 2 . 00 

Engine  and  boiler  house 13. 00 

Chimney  and  flues 8. 00 

Miscellaneous . .  5 . 00 


$120.00 


22         HYDRO-ELECTRIC  DEVELOPMENTS. 

This  figure  $120.00  per  hp.  is  perhaps  an  average 
cost  of  installation  of  a  small  plant. 

We  will  now  figure  what  the  fixed  charges 
amount  to  upon  this  investment. 

Depreciation  we  will  consider  as  5  per  cent,  per 
year,  since  if  we  take  the  average  life  of  the  equip- 
ment as  about  15  years,  upon  reference  to  the  sink- 
ing fund  tables  we  learn,  that  if  5  per  cent,  of 
the  principal  sum  is  put  aside  each  year  and  in- 
vested in  funds  yielding  5  per  cent,  that  the  fund 
amounts  at  the  end  of  this  period  to  the  princi- 
pal sum. 

Assume  money  to  be  worth  say  6  per  cent. 
The  following  table  represents  therefore  something 
like  the  fixed  yearly  expenses: 

Depreciation 5     per  cent. 

Repairs 3 

Taxes 1 

Insurance 0.5 

Interest  upon  investment.  .  .  0 


Total .15.5 

Say  15  per  cent. 

In  order  to  operate  the  plant  it  is  necessary  to 
have  two  men,  one  fireman  at  $2.00  per  day  and 
one  engineer  and  electrician  at  $3.00,  making  total 
wages  for  a  300  day  year  of  $1500  or  $7.50  hp. 
per  year. 

Upon  examination  of  the  type  of  engine  we  may 
estimate  that  such  an  engine  would  require  3.5 


COST  OF  ENERGY  MANUFACTURE.          23 

pounds  of  coal  per  hp-hr.,  for  a  steady  load  with 
everything  working  favorably.  On  the  other 
hand,  when  we  come  to  make  an  examination  of 
the  coal  records  for  the  period  of  the  year  when 
the  heating  apparatus  was  not  in  use,  we  will  find 
very  likely  that  this  engine  may  be  consuming 
from  4  to  8  Ibs.  per  hp-hr.  according  to  the  load 
factor,  quality  of  coal  and  the  fireman. 

The  average  coal  consumption  including  starting 
and  banking  fires  we  will  say  is  not  far  from  6 
Ibs.  per  hp-hr.,  and  the  average  load  upon  the 
engine  about  100  hp.  The  coal  consumption  is 
therefore  6000  pounds  per  10  hour  day,  1,800,000 
Ib.  a  year  or  900  short  tons,  at  say  a  cost  of  $4.00, 
making  the  total  coal  expenses  $3600  per  year,  ex- 
clusive of  the  coal  used  for  heating.  As  the  engine 
is  rated  at  200  hp.  this  is  $18  per  rated  horse- 
power-year for  coal.  The  items  which  go  to  make 
up  the  cost  of  a  horsepower-hour  are  the  following: 

Coal $18.00 

Wages 7.50 

Fixed  charges 18.00 

Miscellaneous. .  1 . 00 


$44.50 

This  is  at  the  rate  of  $8900.00  a  year. 

It  is  now  important  to  estimate  what  energy 
will  have  to  be  sold  to  this  manufacturer  for  in 
order  to  get  the  business.  In  the  first  place  he 
will  probably  not  desire  to  sell  his  own  plant  and 


24          HYDRO-ELECTRIC  DEVELOPMENTS. 

will  wish  to  keep  it  as  an  insurance  against  high 
rates.  However,  he  will  expect  us  to  pay  this 
insurance  and  we  will  probably  wish  to,  as  the 
plant  would  give  us  trouble  if  moved  somewhere 
else.  If  we  say  that  we  will  pay  him  5  per  cent, 
upon  a  fair  value  of  his  investment,  he  will  be- 
lieve we  mean  business.  If  we  sell  him  energy, 
how  are  we  to  effect  the  labor  bills?  He  will 
probably  need  to  employ  one  general  man  to  have 
supervision  over  the  electric  installation  which  of 
course  will  consume  a  very  small  proportion  of 
his  time.  This  man  can  also  keep  up  the  fire  in 
the  boiler  in  winter  which  will  now  be  used  for 
heating. 

Considering  the  time  that  he  is  employed  upon 
this  work  we  may  say  that  one-half  of  his  time 
should  be  charged  to  electrical  plant  and  one-half 
to  general  service  in  the  building.  We  pay  him 
say  $2.50  a  day.  The  electric  installation  there- 
fore bears  a  charge  of  $375.00  a  year.  We  find, 
let  us  say,  that  on  account  of  the  load-factor  at 
this  plant,  that  if  we  could  take  this  business  in 
connection  with  other  power  consumers  that  a 
reserve  of  100  hp.  would  take  care  of  the  special 
load. 

Let  us  assume  then,  that  we  make  the  manufac- 
turer a  price  of  $30.00  per  hp-yr.,  or  for  200 
hp-yr.  $6000.  His  wages  cost  him  $375  and  the 
5  per  cent,  which  we  allow  him  upon  his  plant 
adds  $1200.00,  making  a  total  of  $7575.00  or  he 
would  be  paying  gross  $37.87  per  hp-yr.  as  against 


COST  OF  ENERGY  MANUFACTURE.          25 

$44.50,  which  is  a  saving  of  $1325.00  per  year.  We 
probably  will  find  that  he  has  had  trouble  with  his 
machines,  with  his  men,  and  has  suffered  from 
breakdowns.  This  saving,  together  with  the 
security  of  being  supplied  by  a  company  with 
ample  power  should  appeal  to  him.  In  addition 
to  this,  as  soon  as  he  becomes  one  of  our  customers 
he  has  the  advantage  of  being  able  to  call  upon  us 
any  time  for  advice  or  repairs. 

On  the  other  hand,  we  nominally  take  his  business 
at  the  rate  of  $30.00  per  year,  but  in  reality  his 
average  power  consumption  is  100  hp.  so  that  we 
are  obtaining  $00.00  per  hp-yr.  for  the  machinery 
which  we  are  required  to  reserve  for  him.  If 
the  power  is  used  10  hours  a  day  for  300  days  or 
3000  hours  per  year,  a  rate  of  $60.00  amounts  to 
$.02  per  hp-hr. 


CHAPTER  VI. 
CENTRAL  STATION  ECONOMICS. 

We  have  now  learned  what  price  we  should 
have  to  make  in  the  locality  under  investigation 
in  order  to  obtain  the  business  of  one  class  of  con- 
sumers. We  investigated  this  class  under  the 
assumption  that  if  we  could  afford  to  take  this 
business  we  could  sell  energy  to  smaller  con- 
sumers. It  may  happen  that  there  is  in  the  field 
a  competitor  perhaps  an  Electric  Light  Co.  selling 
electric  energy.  We  probably  cannot  examine 
our  competitors  books  but  it  is  necessary  for  us 
to  know  at  any  rate  what  would  be  the  cost  of 
generating  energy  in  a  well  designed  station  using, 
we  will  say,  coal  for  manufacturing  steam.  If  we 
have  this  information  we  can  tell  which  of  the 
following  three  alternatives  we  had  better  adopt 
granting  each  were  possible: 

1.  Compete  with  the  existing  company. 

2.  Purchase  the  company. 

3.  Sell  electric  energy  to  the  company. 

As  there  is  no  satisfactory  method  of  storing 
electric  energy  in  the  sense  in  which  we  are  ac- 
customed to  think  of  storing  gas  in  holders  and 
water  in  reservoirs,  we  cannot  generate  it  during 
the  portion  of  the  day  when  the  load  is  light  and 
supply  it  when  it  is  needed,  but  we  are  obliged  to 
have  sufficient  machinery  on  hand  to  provide  the 
energy  as  the  customers  desire  it.  This  state- 

26 


UNIVERSITY 

CF 


CENTRAL  STATION  ECONOMICS.  27 

ment  is  modified  at  times  when  the  nature  of  the 
demand  which  causes  the  peak  load  is  of  such  a 
character  that  it  is  more  convenient  or  cheaper 
to  use  an  electric  storage  battery  than  to  purchase 
the  machinery  which  the  storage  battery  is  de- 
signed to  replace. 

For  practical  purposes,  however,  let  us  consider 
that  we  must  have  machinery  of  sufficient  capacity 
in  the  plant  and  wires  of  sufficient  size  to  supply 
the  demand  which  is  made  upon  us  by  our  cus- 
tomers at  the  time  when  the  demand  takes  place. 

It  will  at  once  be  seen  that  there  are  certain 
expenses  entailed  in  keeping  this  machinery  on 
hand  which  are  fixed  by  the  amount  of  or  power 
of  the  machinery;  there  are  also  certain  variable 
expenses  depending  upon  how  long  this  machinery 
is  run.  In  addition,  there  are  certain  miscellaneous 
expenses  which  are  not  dependent  upon  the  power 
of  the  plant  or  the  cost  of  supplying  the  electric 
energy. 

The  general  method,  therefore,  of  arriving  at 
the  cost  of  making  electric  energy  is  to  divide  the 
expenses  into  three  somewhat  arbitrary  sub- 
divisions. 

1.  Expenses  which  are  fixed  by  the  capacity  of 
the  plant  and  the  demand  upon  it. 

2.  Expenses  which  are  variable  and  dependent 
upon  the  amount  of  energy  supplied  as  measured 
by  horsepower-hours  or  kilowatt-hours. 

3.  Expenses  not  strictly  proportioned  to  either 
rating  or  output,  but  wrhich  are  not  of  sufficient 


28         HYDRO-ELECTRIC  DEVELOPMENTS. 

magnitude  to  prohibit  them  from  being  included 
in  one  of  the  other  classes. 

Group  I. — Expenses  dependent  upon  the  cost  of 
demand : 

Rent  or  interest  on  cost  of  land. 

Taxes,  insurance  and  legal  expense. 

Maintenance  of  distributing  system  and  custom- 
er's equipment. 

Salaries  of  officers  and  clerks. 

Office  expenses. 

Group  II. — Expenses     dependent     upon     cost     of 
supply: 

Fuel. 

Water  or  interest  on  money  spent  in  providing, 
water  supply. 

Lubricants  and  waste. 

Repairs  engines,  boilers  and  electric  plant. 
Group  III. — Miscellaneous  expense: 

Advertising  and  soliciting  (Include  in  Group  I.) 

Renewals  of  customers'  lamps  (Include  in  Group 
II.) 

Repairs  of  arc  lamps  (Include  in  Group  II.) 

Experience  has  shown  that  in  general  the 
maximum  load  on  a  plant  is  approximately  75 
per  cent,  of  the  sum  of  the  customers  maximum 
demands.  As  it  is  not  generally  safe  to  count  too 
definitely  upon  this,  a  well  designed  plant  must 
have  some  reserve  power,  to  be  upon  the  safe  side 
we  will  figure  that  the  power  rating  of  the  station 
must  equal  the  sum  of  the  customers  maximum 
demands. 


CENTRAL  STATION  ECONOMICS.  29 

Having  made  this  assumption  let  us  now  figure 
what  is  the  cost  of  demand.  Judging  from  past 
history  and  what  is  likely  to  take  place  in  the 
future  it  is  probably  not  very  far  from  the  truth 
to  estimate  that  the  average  life  of  station  ma- 
chinery is  about  15  years.  Upon  this  assumption 
at  the  end  of  15  years  a  fund  should  have  been 
accumulated  which  would  be  sufficient  to  replace 
the  machinery  which  would  then  have  become  out 
of  date.  We  find  that  a  sinking  fund  of  5  per  cent, 
of  the  structural  value  of  a  plant  set  aside  each 
year  and  the  fund  invested  in  securities  yielding 
5  per  cent,  is  equivalent  to  the  principal  sum  in 
about  15  years. 

The  average  cost  of  installing  a  horsepower  in 
an  electric  plant,  including  distributing  system, 
let  us  take  at  $225.  That  is,  $125  for  station  plant 
and  $100  for  lines,  distributing  appliances,  etc. 

If  money  is  worth  6  per  cent,  and  taxes  amount 
to  1  per  cent.,  and  depreciation  to  5  per  cent., 
the  fixed  charges  amount  to  12  per  cent,  of  $225 
each  year,  or  $27.00  a  year,  whether  the  plant  is 
used  or  not. 

Experience  has  shown  that  the  expenses  detailed 
under  No.  1  which  make  up  the  cost  of  demand 
for  plants  doing  largely  an  electric  lighting  business 
amount  to  from  $15.00  to  $20.00  per  horsepower- 
year.  Taking  the  lower  figure  the  total  cost  per 
year  is  $42.00  for  each  rated  horsepower  of  ma- 
chinery installed.  It  should  be  noted  that  this 
amount  is  what  it  costs  the  company  whether 


30 


HYDRO- ELECTRIC  DEVELOPMENTS. 


the  plant  serves  the  customer  or  not  and  amounts 
to  about  11.5  cents  per  day  for  each  rated  horse- 
power of  machinery  installed. 

An  examination  of  the  station  costs  or  an 
estimate  may  show  that  the  cost  of  supply  is  say 
0.75  cents  per  hp-hr.,  depending  of  course  upon 
the  size  of  the  plant  and  the  demand-factor,  cost 
of  fuel,  etc. 

The  miscellaneous  expenses  will  amount  to  say 
0.5  cents  per  hp-hr.  We  are  now  in  a  position 
to  make  up  a  table  of  costs  of  supplying  1  hp-hr. 
of  electric  energy. 


Hours  use 
maximum 
demand 

of     Cost  of  demand. 
Cost  of  miscellaneous. 
Cost  of  supply  one  hour. 

1  1.5  cents. 
0.5  cents. 
0.75  cents. 

Cost    j-er 
hour  of  use 

(cents). 

1 

11 

.5    + 

.5  + 

.  75 

12 

.  75 

2 

5  , 

,75  + 

.5  + 

.75 

7 

.00 

3  

3  . 

8    + 

.5  + 

.75 

5 

.05 

4  

2 

8   + 

.5  + 

.75 

4 

.05 

5  

2 

3   -f 

.5  + 

.75 

3 

.  55 

6  

1. 

9   + 

.5  + 

.  75 

3 

.15 

7  

1. 

.0    + 

.5  + 

.75 

2 

.85 

8... 

.  .    1 

4    + 

.5  + 

.  75 

2 

.65 

9 

1 

,3    + 

.5  + 

.75 

2 

.  55 

10  

1 

.1    + 

.5  + 

.  75 

2 

.35 

20  

.55  + 

.5  + 

.  75 

1 

.80 

24.. 

,5   + 

.5  + 

:75 

1 

.75 

CENTRAL  STATION  ECONOMICS.  HI 

The  above  table  is  based  upon  the  principle 
that  since  the  plant  is  ready  to  serve  the  customer 
whether  he  uses  electric  energy  or  not,  the  expense 
must  be  borne  by  him.  The  cost  of  demand  was 
found  to  be  11.5  cents  per  day  for  each  rated  horse- 
power of  machinery  installed.  If  the  customer 
uses  one  horsepower  but  one  hour  each  day  in  the 
year  the  rate  charged  must  include  this  sum  to- 
gether with  the  miscellaneous  expense  and  the 
cost  of  supply.  Whereas  if  the  energy  is  employed 
at  the  rate  of  one  horsepower  for  two  hours  a  day 
each  day  in  the  year,  the  cost  of  demand  is  divided 
equally  between  each  hour  and  the  miscellaneous 
expense  and  cost  of  supply  added.  The  cost  of 
one  hour's  use  of  the  maximum  demand  of  one 
horsepower  amounts  to  12.75  cents  per  day  or 
$40.53  per  year.  For  two  hours  use  per  day  of 
one  horsepower  the  charge  is  at  the  rate  of  7.00 
cents  per  hour  that  is  14.00  cents  for  two  hours 
use  or  $52.10  per  year. 

The  table  of  course  being  based  upon  the  assump- 
tion that  the  power  which  the  company  is  called 
upon  to  furnish  will  be  required  at  a  time  when 
the  station  is  carrying  its  maximum  load.  Putting 
the  matter  in  another  way,  the  above  table  shows 
the  actual  cost  to  the  company  in  cents  per  hp- 
hr.  in  supplying  electric  energy  to  customers  whose 
maximum  demand  ever  comes  at  the  time  the 
station  is  called  upon  to  furnish  its  maximum 
load  or  in  other  words  whose  energy  is  used  at 
the  peak  of  the  load  of  the  station. 

The  peak  load  upon  a  station  varies  in  amount 


32         HYDRO-ELECTRIC  DEVELOPMENTS. 

in  different  months  in  the  year,  the  maximum  in 
northern  climates  usually  coming  around  Christmas 
time  and  the  minimum  in  summer.  All  the  rates 
which  the  electric  light  company  has  made  and 
which  can  be  ascertained  should  obviously  be 
studied  in  connection  with  the  cost  figures.  To 
compete  successfully  with  these  costs  the  water 
power  company  will  obviously  have  to  sell  energy 
at  a  price  which  will  not  permit  the  electric  light 
company  to  undersell  at  a  profit.  From  the 
general  situation,  the  Water  Power  Company 
should  be  able  to  judge  pretty  well  at  what  price 
it  can  get  the  business. 

The  next  question  which  we  are  called  upon  to 
investigate  is  at  what  price  can  we  afford  to  sell 
to  the  electric  light  company.  Let  us  consider 
first  the  case  which  of  course  would  be  the  most 
difficult  to  meet,  namely,  the  purchase  of  electric 
energy  from  the  water  power  company  which 
would  entail  the  electric  light  company  shutting 
down  a  corresponding  rated  horsepower  of  ma- 
chinery. The  electric  light  company,  by  allowing 
its  machinery  to  remain  idle  would  save  only  the 
items  entering  into  the  cost  of  supply. 

If  the  water  power  company  sold  to  the  electric 
light  company  directly  it  would  save  many  of 
the  expenses  which  are  entailed  in  the  distribu- 
ting energy. 

Let  us,  for  the  sake  of  example,  assume  that 
$28.00  per  horsepower-year  will  repay  the  water 
power  company  for  its  current.  Provided  the 
water  power  company  has  an  abundance  of  water, 


CENTRAL  STATION  ECONOMICS. 


33 


on  hand,  it  is  immaterial  whether  it  supplies  energy 
one  or  ten  hours  a  day;  it,  however,  makes  a  very 
great  difference  to  the  producer,  with  a  steam  or 
gas  engine,  how  long  he  is  relieved  from  burning 
fuel.  Let  us  prepare  a  table  showing  what  is 
the  equivalent  of  $28  per  hp-yr.  reduced  to  an 
hour  basis  per  day,  so  that  these  figures  can  be 
compared  with  those  showing  the  saving  to  the 
consumer  for  every  hour  that  he  shuts  down  his 
generating  machinery  and  allows  the  same  to 
remain  idle. 


No.  of 
hours 
of  use. 

Equivalent 
$28.00 
per  year. 

Cents. 

Cost  of 
supply. 

1  
2     

7.67 
3.83 

0.75 

0  75 

3  

2.55 

0  75 

4 

1  92 

0  75 

5             ~" 

1  53 

0  75 

6 

1  28 

0  75 

7           

..    1.01 

0  75 

8            

0.96 

0  75 

9  

0.85 

0  75 

10 

0  76 

0  75 

11 

0  69 

0  75 

12 

.    .  .   0.64 

0  75 

13            .    .  .  . 

0.59 

0  75 

14  

0.55 

0  75 

15  

0.51 

0  75 

20 

0  38 

0  75 

24.. 

.    0.32 

0.75 

34 


HYDRO-ELECTRIC  DEVELOPMENTS. 


The  above  figures  indicate  that  the  distributing 
company,  when  it  has  the  machinery  on  hand  and 
consequently  has  to  pay  the  fixed  charge,  can  in 
this  case  use  the  machinery  upon  loads  which  last 
less  then  11  hours,  to  better  advantage  than  it 
can  purchase  energy  at  $28.00  per  hp-yr. 

Conversely  in  this  case  the  distributing  company 


3500 


3OOG 


250C 


^£000 
%  /50C 


/oo 


500 


6AM 


/Znoon         6Fyyf 
Load  curves 

FIG.   1. 


/Znifffif       6AM 


can  profitably  purchase  energy  which  it  is  called 
upon  to  supply  for  longer  than  11  hours  from 
the  water  power  company.  To  show  this  better 
the  foregoing  exhibit,  Fig.  1,  gives  load  curves  of 
the  distributing  plant  for  different  months  in  the 
year.  Assuming  that  the  proper  working  of  the 
power  house  shifts  of  men  and  the  banking  of  fires 
do  not  complicate  the  question  too  much,  some- 


CENTRAL  STATION  ECONOMICS.  35 

where  between  .4  and  B,  namely  1500  and  2250 
hp.  would  be  selected  as  the  amount  of  energy 
to  be  bought. 

This  purchased  energy  is  known  as  "  firm  power." 
Just  where  the  line  of  "  firm  power  "  would  be 
located  between  A  and  B  would  depend  in  practice 
upon  the  rate  of  growth  of  the  distributing  com- 
pany's business  and  local  conditions.  It  is  to 
be  noted,  however,  that  the  lower  the  price  we  make 
to  the  consumer,  the  higher  the  lines  of  "  firm 
power  "  move  up  the  chart  and  consequently  the 
number  of  horsepower  the  electric  light  company 
can  afford  to  purchase  increases.  By  the  proper 
use  of  the  information  we  should  be  able  to  form 
a  pretty  general  idea  of  the  price  we  should  be 
called  upon  to  make  in  order  to  get  the  business. 

We  know  how  much  energy  the  company  could 
afford  to  buy  and  the  price.  If  we  purchase  the 
company  we  know  what  we  can  save  on  the 
operating  expenses  and  consequently  the  added 
earnings  upon  the  purchase  price  and  yet  obtain  a 
satisfactory  return  upon  our  water  power  invest- 
ment. 

From  the  methods  of  investigation  above  out- 
lined we  can  form  a  pretty  definite  idea  of  the 
price  at  which  the  power  company  would  have  to 
sell  electric  energy  in  order  to  compete  with  the 
existing  company  and  also  how  much  energy 
the  electric  light  company  can  afford  to  buy  from 
the  water  power  company  and  the  price  which  it 
can  afford  to  pay. 


36         HYDRO-ELECTRIC  DEVELOPMENTS. 

The  question  of  the  ultimate  destiny  of  the  exist- 
ing company  is  of  course  a  subject  of  negotiation 
but  by  this  investigation  we  have  established  a 
price  that  we  will  probably  receive  for  the  electric 
energy  as  long  as  the  existing  company  remains 
in  the  field. 

The  principle  which  we  have  endeavored  to 
bring  out  in  connection  with  the  sale  of  energy  to 
lighting  companies  can  be  applied  with  equal 
value  to  street  railways,  and  is  discussed  here  for 
convenience.  The  curve  showing  the  power  con- 
sumed at  the  various  periods  of  the  day  or  in  other 
words  the  load  curve  is  in  general  materially 
different  from  the  curve  of  a  lighting  company. 
The  load  is  likely  to  be  heavier  in  summer  when 
more  cars  are  running  and  more  business  is  done 
than  it  is  in  winter,  which  of  course  is  different 
from  the  lighting  load.  The  form  of  the  curve 
is  also  different  in  that  there  is  a  peak  in  the 
morning  when  people  are  carried  to  work  and  also 
one  at  night.  A  study  of  these  curves  for  the 
various  months  and  for  a  few  years  will  bring  out 
many  interesting  facts.  A  question  of  course  of 
prime  importance  as  influencing  the  position  of 
the  line  of  "firm  power"  is  the  probable  rate  of  in- 
crease of  the  power  requirements.  First,  we  desire 
to  establish  a  line  showing  the  amount  of  energy  a 
street  railway  can  afford  to  buy  and  shut  down 
its  generating  machinery  provided  no  growth 
takes  place.  We  should  not  endeavor  in  a  rapidly 
growing  community  to  make  a  price  so  low  that 


CENTRAL  STATION  ECONOMICS.  87 

this  line  will  be  forced  up  to  the  highest  point. 
Because  the  price  which  we  have  thus  established 
will  be  very  difficult  to  increase  afterward.  If 
the  company  is  using  more  energy  each  year  and 
if  we  were  not  going  to  supply  them  they  would 
be  forced  to  purchase  additional  machinery  each 
year  to  provide  for  the  increased  load.  For  this 
increased  amount  of  energy  the  street  railway 
company  can  obviously  afford  to  pay  us  more 
money  than  they  could  for  energy  which  would  dis- 
place the  machinery  already  installed. 

The  additional  "  firm  power  "  which  we  are 
to  supply  the  street  railway  each  year  for  its  in- 
creased business  may  be  only  a  small  proportion 
of  its  total  load,  yet  a  very  substantial  proportion 
of  the  power  which  we  have  contracted  to  supply 
originally.  We,  therefore,  should  not  endeavor 
to  take  the  largest  part  of  the  street  railway  load 
which  we  can  get  at  the  cheapest  price  but  we 
must  determine  what  it  is  costing  it  to  produce 
electric  energy,  for  loads  lasting  different  lengths 
of  time.  A  table  should  be  prepared  showing  these 
costs  and  the  same  compared  with  the  table  giv- 
ing costs  derived  from  the  rate  which  we  desire 
to  make.  We  should  endeavor  to  get  all  the 
business  which  the  rate  shows  us  to  be  entitled 
to,  with  the  promise  of  obtaining  the  increased 
business  the  following  years.  In  figuring  power 
business  we  are  of  course  to  remember  that  the 
power  company  saves  the  distributing  expense. 
We  are  sometimes  asked,  however,  to  make  a 


38         HYDRO-ELECTRIC  DEVELOPMENTS. 

price  for  the  electric  energy  transformed  and 
ready  for  use.  The  price  we  make  must  take 
into  consideration  the  maintenance  of  the  con- 
version apparatus  and  the  fact  that  a  sufficient 
sinking  fund  must  be  set  aside  each  year  to  write 
off  the  cost  when  the  contract  expires, 


CHAPTER  VII. 
SALE  OF  ELECTRIC  ENERGY. 

Having  determined  in  Chapter  IV  to  amount  of 
energy  that  is  being  used  in  the  locality  and  the 
Chapter  V  and  VI  the  probable  price  that  the 
water  power  company  can  obtain  for  electric 
energy.  The  next  step  is  to  analyze  the  cost  of 
selling  and  generating  electric  energy  by  water 
power. 

Ever  since  electric  light  companies  began  the 
sale  of  electric  energy  for  light  and  power  pur- 
poses, engineers  have  endeavored  to  evolve  a 
satisfactory  system  for  charging  for  service.  A 
great  many  methods  have  been  invented,  some  of 
them  unfair  to  the  power  companies,  some  unfair 
to  the  customers,  and  others  unsatisfactory  to 
both.  The  main  difficulty  has  been  to  obtain  an 
equitable  method  of  payment  for  the  peak  loads. 
In  the  chapter  dealing  with  the  commercial  in- 
vestigation, the  general  method  was  outlined  for 
determining  the  cost  to  an  electric  light  company, 
manufacturing  its  own  energy. 

In  the  case  of  a  water  power  company  it  is,  within 
limits,  immaterial,  whether  the  power  is  furnished 
for  two  hours  or  twenty-four  hours  per  day;  the 
main  point  is  that  the  company  must  during  each 
day  obtain  sufficient  revenue  from  each  horse- 
power rating  of  machinery  installed  to  pay  for 
holding  this  machinery  for  the  customers  benefit. 

39 


40         HYDRO-ELECTRIC  DEVELOPMENTS. 

We  saw  in  discussing  this  question  in  the  pre- 
ceding chapter  that  the  charges  arising  from  the 
readiness  to  serve  entailed  certain  fixed  expenses 
which  were  independent  of  the  energy  supplied. 
Excluding  the  interest  and  depreciation  charges 
upon  the  plant  the  cost  of  demand  is  substantially 
the  same  whether  the  power  is  developed  by  water 
or  steam  or  some  other  substance. 

If  the  water  power  company  has  no  steam  ma- 
chinery for  carrying  peak  loads  of  short  duration 
it  is  plainly  evident  that  if  the  original  cost  per 
horsepower  for  the  water  power  development 
were  much  greater  than  the  cost  of  installing  a 
horsepower  of  steam  machinery  a  steam  plant 
could  handle  such  a  load  more  cheaply. 

As  an  illustration  of  this,  take  the  load  of  an 
electric  light  company. 

For  three  months  in  the  year  we  may  have  in 
some  localities  a  heavy  peak  load  lasting  at  most 
four  hours.  If  it  costs  say  $125.00  to  install  one 
rated  horsepower  of  steam  machinery  in  the 
plant,  the  interest,  depreciation  and  repair  charge 
might  bring  the  fixed  expenses  to  $18.75  a  year. 
The  conditions  which  existed  in  the  plant  might 
admit  of  handling  this  form  of  load  without  any 
additional  men ;  the  extra  coal  used  might  amount 
to  3  cents  per  horsepower-day  or  $2.70  for  the 
three  months  in  other  words,  $21.45  for  handling 
each  horsepower-year  of  peak  load.  The  water 
power  company  could  obviously  not  take  this  load 
unless  the  cost  of  installation  were  low  and  even 
then  the  contract  would  be  tying  up  machinery 


SALE  OF  ELECTRIC  ENERGY.  41 

which  might  be  used  in  supplying  a  different 
kind  of  load  where  the  earnings  might  be  three 
times  as  much. 

An  inspection  of  the  load  curve  of  the  electric 
light  company  very  probably  would  show  that  the 
power  could  be  split  up  into  peak  load  power  and 
a  "  firm  "  15  hourpower.  The  cost  of  generating 
this  block  of  "  firm  power  "  to  the  electric  light 
company  may  be  nearly  $50  per  hp-yr.,  not  con- 
sidering the  interest  upon  the  investment.  The 
water  power  company  could  undoubtedly  afford 
to  take  this  part  of  the  load  at  a  price  that  would 
save  the  electric  light  company  money.  The 
electric  light  company  on  the  other  hand  would 
hardly  care  to  contract  for  the  peak  power  for 
more  than  it  cost  to  generate  it,  yet  this  amount 
might  not  yield  the  water  power  company  suffi- 
cient income.  Customers  loads  also  vary  in  so 
many  different  ways  that  any  formula  which  ac- 
counts for  this  variation  only  through  the  use  of  a 
load  factor  is  very  likely  to  be  very  misleading. 

The  water  power  company  which  sells  energy 
is  forced  to  name  different  prices  for  different 
classes  of  service. 

We  will,  therefore,  analyze  the  cost  of  selling 
electric  energy  to  customers  using  it  for, 

I.   Electric  lighting. 
II.  Supplying  small  motors  under  25  hp. 

III.  Supplying  motors  under  300  hp. 

IV.  Supplying  practically  continuous  load. 

V.  Firm  power  of  street  railways  and  electric 
light  companies. 


42         HYDRO-ELECTRIC  DEVELOPMENTS 

In  retailing  electric  energy  in  relatively  small 
amounts  for  electric  lighting  purposes,  the  cost  of 
demand,  is -the  primary  one  to  consider. 

The  cost  of  demand  including  miscellaneous 
expenses  but  excluding  fixed  charges  to  a  number 
of  companies  supplying  the  larger  cities  in  Massa- 
chusetts averaged  very  close  to  $20  per  horsepower 
year.  These  companies  supply  of  course,  a  certain 
amount  of  power  but  not  enough  to  appreciably 
affect  the  cost  of  demand.  This  figure  is  the  cost 
of  maintaining  the  plant  and  organization  in  the 
state  of  being  ready  to  serve  the  customer  whether 
the  energy  is  used  or  not.  Money  invested  in  a 
water  power  enterprise  should  yield  about  nine 
per  cent,  in  order  to  keep  the  principal  sum  unim- 
paired. 

This  is  arrived  at  as  follows: 

Interest  upon  investment 5.5  per  cent. 

Depreciation  due  to  change  in  art  and 

advancement  of  science 1.5    " 

Insurance  fund  to  provide  for  menace 

due  to     contingencies       commonly 

called  "  casualties  " 1.0    " 

*  Repairs  upon  plant 1.0    " 

"oTb"  " 

*  The  item  of  repairs  upon  plant  is  commonly  included 
in  operating  expenses.  This  item  overlapping  as  it  does 
the  depreciation  charge  is  treated  here  in  this  manner  to 
avoid  complications  and  permit  of  an  easy  method  of 
figuring. 

The  forming  of  an  adequate  estimate  of  de- 
preciation is  very  difficult.  An.  assumption  usually 


SALE  OF  ELECTRIC  ENERGY.  43 

made  is  that  the  depreciation  amounts  to  3  per 
cent,  of  the  value  of  the  machinery  and  apparatus 
exclusive  of  the  actual  hydraulic  development, 
which  is  supposed  to  be  permanent.  As  the  value 
of  the  depreciating  portion  of  the  plant  is  within 
limits  equal  to  the  non-depreciating  portion  the 
figure  1.5  per  cent,  is  perhaps  fair.  The  insurance 
fund  of  1  per  cent,  which  would  of  course  not 
provide  for  great  devastation  but  usually  should 
take  care  of  ordinary  contingencies  and  this  amount 
is  quite  often  set  aside  as  a  sinking  fund  to  retire 

1  per  cent,  of  the  bonds  yearly.     The  repairs  upon 
the  working  portion  of  the  plant  amount  to  about 

2  per  cent,  or  1  per  cent,  upon  the  whole  invest- 
ment is  usually  sufficient  to  set  aside. 

The  expenses  which  go^to  make  up  the  cost  of 
supply,  labor  and  miscellaneous  expenses  usually 
vary  from  $3  to  $5  per  horsepower- year,  depending 
upon  the  size  and  number  of  the  units. 

Assuming  that  the  cost  of  installing  one  horse- 
power of  water  power  plant,  is  in  the  case  which 
we  are  investigating  $160.00.  The  price  which 
we  must  obtain  for  each  hp-yr.  of  electric  energy 
used  for  lighting  purposes,  should  the  same  ever 
be  used  upon  the  peak  load  of  the  station,  would 
be  as  follows: 

Cost  of  demand $20.00 

Cost  of  money 

9  per  cent,   on  $160.00 14.40 

Cost  of  supply 3 . 00 

$37.40 


44         HYDRO-ELECTRIC  DEVELOPMENTS. 

This  would  be  at  the  following  rate  to  a  customer: 
Use  of  one  horsepower  for  lighting  purposes. 

1  hour   per  day  10.2  cents  per  hp-hr. 

2  hours    "  5.1       "         "       "      " 

o  «  u          u  o     A          ((  a          tt         u 

A          a  u         a  9    ^         a  a          "         " 

etc. 

In  order  that  a  company  may  obtain  sufficient 
information  to  sell  electric  energy  at  retail  it  is 
necessary  to  install  a  meter  which  records  the 
customers  maximum  demand  upon  the  plant  in 
kilowatts  or  horsepower.  Then,  theoretically,  by 
multiplying  this  amount  by  the  price  of  a  horse- 
power-hour of  electric  energy  we  would  arrive  at 
the  charge  which  the  customer  would  pay  the  com- 
pany for  reserving  the  machinery  to  supply  him 
writh  electric  energy.  As  a  matter  of  fact  it  has 
been  found  that  when  this  system  is  used  many 
customers  never  turn  off  all  their  lamps  and  that 
machinery  must  be  kept  going  to  supply  energy 
which  is  being  wasted.  A  slight  modification  of 
the  above  method  is  to  use  a  watt-hour  meter  to 
show  how  many  horsepower-hours  or  kilowatt- 
hours  have  been  used.  For  instance  it  may  have 
been  found  by  experience  or  it  may  have  been 
estimated  that  the  average  daily  consumption  of 
energy  will  last  three  hours.  We  wish  to  place 
a  small  penalty  upon  the  customer  for  wasting 
energy.  The  charges  therefore,  might  be  made 
up  of  two  kinds,  a  fixed  charge  for  every  day  in 
the  year,  called  a  calendar  charge  and  a  small 


SALE  OF  ELECTRIC  ENERGY.  45 

additional  charge  based  upon  using  the  lamps, 
called  a  service  charge. 

If  three  hours  per  day  is  the  average  number  for 
which  a  -lamp  is  used  during  the  year,  the  fixed 
daily  calendar  charge  plus  the  three  hour  service 
charge  should  be  so  arranged  that  at  the  end  of 
the  year  the  power  company  would  receive  in  the 
case  chosen  in  the  vicinity  of  $37.40  per  year 
for  each  horsepower  of  customers  maximum  de- 
mand. The  customer  who  wasted  the  electric 
energy  would  of  course  pay  more  than  this  sum. 
Should  the  watt-hour  meter  show  that  the  lamps 
had  not  been  burned  the  customer  would  pay  the 
minimum  rate,  or  the  calendar  charge.  Very 
many  modifications  of  the  above  system  have  been 
devised  and  many  can  be  worked  out,  the  object 
being  to  have  the  customer  pay  for  the  number 
of  horsepower-hours,  which  could  have  been  pro- 
duced by  the  machinery  which  was  reserved  for 
his  benefit. 

II.  Supplying  energy  to  small  motors. 

In  making  up  a  schedule  of  rates  for  consumers 
requiring  small  amounts  of  power,  it  should  be  re- 
membered that  the  cost  of  demand  varies  with 
the  size  of  the  motor.  Furnishing  energy  for  the 
vSmall  motor,  say  up  to  5  hp.,  requires  essentially 
the  maintenance  of  all  the  paraphernalia  which 
goes  to  make  up  the  cost  of  demand  for  the  light- 
ing customer.  The  cost  of  demand  not  including 
interest  upon  the  investment,  etc.,  for  supplying 
energy  in  large  quantities  probably  approaches 


46         HYDRO-ELECTRIC  DEVELOPMENTS. 

very  near  to  $4.00  per  horsepower-year.  It  is 
very  difficult  to  obtain  satisfactory  data  from 
enough  companies  to  definitely  establish  this 
figure  but  we  should  probably  not  be  far  out  of 
the  way  if  this  amount  were  used. 

As  has  been  previously  pointed  out  it  is  cus- 
tomary to  figure  that  we  can  oversell  the  capacity 
reserved  for  small  customers,  three  times.  Since 
it  is  extremely  advantageous  to  sell  as  much  energy 
as  possible  in  small  lots  on  account  of  the  stability 
of  the  load.  Small  users  of  energy  should  be  en- 
couraged and  they  should  be  given  the  benefit  of 
the^  advantages  of  securing  this  load. 

We  probably  should  not  be  very  far  out  of  the 
way  if  we  decided  to  use  the  following  as  the  cost 
of  demand  for  small  motors. 

Horsepower  Per  horsepower-year. 
Up  to     5  $20.00 

"      "    10  17.50 

"    •  "    15  15.00 

"      "    20  12.50 

"      "    25  10.00 

To  these  figures  must  be  added  the  fixed  charges 
upon  the  plant  investment  per  hp.,  as  was  done 
in  figuring  the  cost  of  lighting  service,  plus  the 
service  charge,  the  horsepower  used  in  figuring 
the  amount  of  fixed  charge  being  the  amount 
actually  demanded  of  the  plant,  namely  for  motors 
below  25  hp.,  one  third  of  a  hp.' for  each  horse- 
power of  motors  as,  has  been  previously  explained. 


SALE  OF  ELECTRIC  ENERGY.  47 

III.  In  supplying  electric  energy  for  motors  of 
more  than  25  hp.  and  up  to  300  hp.  the    cost    of 
demand  would  probably  run  from  ten  dollars  per 
hp-yr.  to  five  dollars  for  the  larger  size  equipment. 
The   power  company  would  probably  be   safe   in 
figuring  for  these  motors  that  a  plant  rating  equal 
to  from  one-half  to  full  connected  load  would  be 
required. 

IV.  In  supplying  energy  for  a  practically  con- 
tinuous   load    as    for    electrolytic    purposes,    the 
energy  rate    or  power  is  practically    constant  day 
and  night.     This  of  course  is  the  most  satisfactory 
kind  of  load  for  a  power  company  to  have  and  the 
cost  of  supplying  the  same  can  be  easily  figured. 
Some    power    companies,    like    those    at    Niagara 
Falls  are  said  to  have  built  up  very  regular  loads 
by  supplying  energy  to  the  companies  for  electro- 
lytic purposes. 

V.  The  supplying  of  large  quantities  of  "  firm 
power  "  to  street  railways  and  electric  light  com- 
panies reduces  the  cost  of  demand  to  a  low  figure. 
In  making  such  contracts  the  power  company  is 
usually  called  upon  to  make  a  rate  which  is  low 
enough   to   allow   the   consumer   to   let   a   certain 
amount  of  his  machinery  remain  idle.     The  power 
company    is,    therefore,    forced    to    compete    with 
cost  of  generating  the  energy  only.      In  the  pre- 
vious chapter  under  commercial  investigation,  the 
question  of  making  rates  for  this  service,  was  out- 
lined. 

At  times  chances  arise  for  supplying  energy  to 


48         HYDRO-ELECTRIC  DEVELOPMENTS. 

customers  who  agree  not  to  use  it  at  the  time  when 
the  maximum  peak  load  comes  upon  the  station. 
As  an  example  of  this  may  be  cited,  a  pumping 
plant  belonging  to  a  city,  which  can  usually  dis- 
continue pumping  during  the  hours  when  the  power 
station  is  called  upon  to  furnish  the  greatest 
amount  of  power. 

In  figuring  the  cost  at  which  this  business  may 
be  profitably  taken,  since  the  energy  is  not  to  be 
used  at  the  time  when  the  station  is  called  upon  to 
furnish  the  maximum  power,  the  fixed  charges  upon 
the  investment  in  the  machinery  used  for  supply- 
ing this  character  of  service  may  be  disregarded 
as  no  machinery  has  been  reserved. 

The  prices  at  which  energy  may  be  sold  are 
consequently  reduced  by  this  amount. 


CHAPTER  VIII. 
PRIMARY  AND  SECONDARY  POWERS. 

As  has  been  previously  pointed  out  the  amount 
of  water  flowing  in  rivers  varies  with  the  seasons 
of  the  year  and  during  a  series  of  years.  The 
manner  in  which  this  variation  of  flow  occurs  is 
of  extreme  importance  since  it  of  course  directly 
affects  the  amount  of  power  which  the  power 
company  can  contract  to  deliver.  The  penalties 
imposed  by  contracts  for  interruption  of  power 
supply  are  very  strict  and  a  precise  knowledge  of 
what  one  is  in  a  position  to  sell  is  consequently 
vital. 

It  is  very  often  the  case  that  if  we  should  take 
the  minimum  flow  of  the  stream  in  the  least  flow 
month  and  least  flow  year  that  the  amount  of 
power  which  we  would  develop  would  be  but  a 
trifling  proportion  of  the  average  flow  and  that 
consequently  the  dams,  etc.,  would  be  so  expensive 
in  comparison  with  the  power  available  that  the 
undertaking  would  be  prohibitive.  Under  cer- 
tain conditions,  therefore,  it  has  been  customary 
to  supplement  the  least  flow  by  the  use  of  pondage, 
reservoirs  and  steam  auxiliaries. 

Another  method  which  has  been  employed  is 
to  allow  the  customer  to  maintain  the  reserve 
power,  and  contract  only  to  deliver  an  intermittent 
power  at  a  low  price  for  the  energy.  This  form 
of  energy  is  known  as  secondary  energy  and  the 

49 


50         HYDRO-ELECTRIC  DEVELOPMENTS. 

price  at  which  it  can  be  sold  depends  upon  its 
conformity  to  the  customers  demands.  The  value 
in  general  of  secondary  energy  is  fixed  by  the  value 
of  primary  water  power  in  the  locality  less  the 
fixed  charges  of  maintaining  a  steam  plant  reserve, 
less  the  probable  operating  cost  of  using  the  steam 
auxiliary,  less  a  bonus  or  inducement  commen- 
surate with  the  menace  of  using  a  power  varying 
as  to  regularity. 

In  making  water  power  developments  it  is  not 
usually  considered  conservative  to  include  in  the 
estimate  of  the  gross  revenue  of  the  plant  any  earn- 
ings from  secondary  energy.  If  any  energy  can  be 
sold  advantageously  upon  this  basis  after  the  de- 
velopment has  been  made,  such  earnings  would  of 
course  be  so  much  gained.  The  price  which  a 
power  company  obtains  for  secondary  energy  is 
usually  low  and  the  cost  of  producing  this  class 
of  energy  is  not  very  materially  different  for  that 
of  producing  primary  energy,  since  the  investment 
charges  are  practically  the  same  and  the  operating 
expense  not  substantially  different. 

The  common  practice  is  for  the  power  company 
consequently  to  maintain  all  reserves,  etc.,  and  sell 
primary  energy. 

In  every  business  undertaking  we  are  called 
upon  to  determine  what  risks  we  may  take  without 
overstepping  the  bounds  of  conservatism. 

Our  customers  are  going  to  call  upon  us  in  all 
probability  for  a  different  number  of  horsepower 
in  winter  and  in  summer,  by  day  and  by  night. 


PRIMARY  AND  SECONDARY  POWERS.       51 

What  we  desire  to  know  is  whether  the  river  can 
furnish  us  this  power  at  times  when  the  customers 
demand  the  same. 

So  that  the  question  ultimately  comes  down 
to  how  many  dollars  net  a  year  can  a  river  earn 
for  us.  This  we  must  know,  to  determine  whether 
the  development  will  be  financially  successful. 
Since  we  should  by  this  time  know  something 
about  the  flow  of  the  river,  the  first  step  in  making 
these  deductions  is  to  plot  a  probable  curve  show- 
ing the  power  which  we  will  be  called  upon  to 
deliver.  The  method  of  doing  this  is  to  analyze 
the  amount  of  load  which  we  will  be  required  to 
carry.  For  instance,  from  the  data  which  was 
obtained  from  the  commercial  investigation,  we 
can  make  a  number  of  predictions  with  very  fair 
accuracy.  (Fig.  2,  page  52.) 

Let  A  represent  our  maximum  daily  load. 

Let  B  represent  the  maximum  daily  street  rail- 
way load. 

Let  C  represent  maximum  daily  lighting  load. 

Let  ABC  represent  the  composite  curve  made 
up  of  the  sum  of  all  these  curves. 

This  curve  shows  us  that  if  the  height  of  the 
point  P  measured  upon  a  certain  scale  is  X  horse- 
power in  June,  the  point  P'  is  some  Y  per  cent, 
greater  in  December.  The  difference  between 
these  two  amounts  of  power  will  vary  according 
to  the  character  of  the  loads  and  the  location  of 
the  market.  But  as  we  are  going  to  be  paid  at 
the  rate  of  the  peak  load  horsepower  furnished 


HYDRO-ELECTRIC  DE\ 'ELOPMENTS, 


during  the  year  we  are  to  be  paid  at  the  rate  of  P ' 
horsepower.  We  are  primarily  interested  in  dis- 
covering how  we  can  use  the  flow  of  water  in  the 
river  to  allow  us  to  supply  power  represented  by  a 
curve  having  the  general  characteristics  of  ,4  B  C. 
An  inspection  of  the  tables  showing  the  flow  of 
the  stream  may  indicate  that  the  minimum  flow 
occurs  in  August  or  September.  It  at  once  be- 


ff 


June 

FIG.  2. 


Dec 


comes  evident  that  these  months  must  be  studied 
carefully.  Our  estimated  load  curve  shows  that 
we  may  expect  less  load  in  July,  so  that  since  the 
flow  in  this  month  is  greater  than  the  minimum, 
this  month  will  probably  be  provided  for.  We 
must  now  investigate  how  the  flow  increases  from 
the  low  point  during  October  and  November  and 
see  whether  it  is  at  a  fast  enough  rate  to  take  care 
of  the  increasing  load. 


PRIMARY  AND  SECONDARY  POWERS.       53 

Fig.  2  shows  the  relation  of  the  daily  maximum 
peak  loads  and  does  not  consider  the  length  of 
time  the  peak  lasts.  To  find  this  out  we  must 
analyze  the  kind  of  load  we  are  to  carry.  We  saw 
the  commercial  load  was  a  ten-hour  load,  the  main 
peak  of  the  street  railway  load  lasted  for  say  five 
hours,  etc.  We  must  now  plot  a  typical  daily 
load  curve  for  the  least  flow  months. 

Assume  the  curve  on  Fig.  3  is  such  a  curve  a^d 
shows  that  if  we  had  some  method  of  storing  the 


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water  from  12  night  to  12  noon  and  liberating 
it  through  the  wheels  when  needed,  a  much  smaller 
flow  of  the  river  would  be  just  as  useful  as  if  we 
had  a  larger  continuous  flow.  The  point  P2  is  a 
point  occurring  upon  the  line  ABC,  Fig.  2. 

The  engineering  investigation  will  show  how 
much  storage  we  are  able  to  control.  Should  we 
have  abundant  pondage  we  may  be  able  to  carry 
a  load  represented  by  the  curve  on  Fig.  3  with  a 
less  continuous  flow  of  water  than  would  be 


54         HYDRO-ELECTRIC  DEVELOPMENTS. 

equivalent  to  that  necessary  to  carry  P2  if  the  load 
lasted  for  a  long  time. 

Referring  again  to  Fig.  2,  line  A  B  C,  we  find 
that  under  certain  conditions  the  power  obtainable 
from  the  least  flow  is  much  less  than  what  we  are 
going  to  get  paid  for.  We  have  so  far  been  deal- 
ing simply  with  daily  amounts  of  water  in  any  one 
year.  Our  next  task  is  to  study  the  variation  in 
flow  from  one  year  to  another.  We  shall  find  in 
general  in  studying  the  records  showing  flow  of  the 
river  that  one  year  was  very  low  and  the  average 
low  flow  of  a  number  of  other  years  did  not  approxi- 
mate this  one  unfavorable  year.  Should  we  find 
that  the  lowest  flow  year  furnishes  us  Avith  enough 
horsepower  for  our  present  demands,  our  investiga- 
tion need  proceed  no  further.  We  shall  assume, 
however,  that  we  desire  to  develop  the  maximum 
horsepower  in  the  stream  which  will  show  a  profit 
upon  the  sale. 

We  will  next  assume  in  order  to  bring  out  an 
example  that  the  least  flow  year  not  considering 
pondage,  etc.,  produced  10,000  hp.  Upon  taking 
averages  of  a  group  of  other  low  years,  excluding 
the  lowest,  we  may  find  that  we  can  produce  say 
15,000  hp.  An  average  of  all  years  at  the  low 
flow  period  may  show  an  available  flow  of  17,000  hp. 

A  study  of  the  situation  may  indicate  that 
should  we  provide  auxiliary  generating  machinery 
to  make  the  lowest  flow  year  equal  the  average 
low  flow  years  that  this  machinery  might  remain 
idle  twenty  years  before  it  would  have  one  year  of 
usefulness  under  the  assumption  that  the  future 


PRIMARY  AND  SECONDARY  POWERS.       55 

can  be  judged  by  the  past.  If  such  should  be  the 
case  it  would  be  undoubtedly  more  advantageous 
to  run  the  risk  of  paying  damages  caused  by  non- 
fulfillment of  contracts  than  to  allow  this  machinery 
to  be  idle.  Now  assume  that  we  have  made  up 
our  minds  that  it  is  a  fair  business  risk  to  expect 
that  we  can,  15  years  out  of  20  say,  get  15,000  hp. 
Let  us,  however,  reduce  this  to  12,000,  hp.,  since 
we  may  confidently  expect,  say  19  years  out  of 
20,  to  be  sure  of  this  flow,  and  see  what  the  result 
will  be.  We  must  provide  from  our  earnings  an 
insurance  fund  to  guard  against  a  5  per  cent, 
menace  (once  in  twenty  years)  upon  12,000  less 
10,000  or  2,000  hp.,  or  one  sixth  of  our  product. 
The  menace  is,  therefore,  reduced  to  five  sixths  of 
one  per  cent,  of  the  total  power,  or  less  than  an 
ordinary  fire  risk.  If  we  are  going  to  supplement 
the  river  flow  by  either  reservoirs  or  steam  power, 
let  us  consider  that  wre  can  safely  call  our  normal 
flow  12,000  hp.,  since  as  we  increase  our  output 
above  the  12,000  hp.,  our  proportionate  menace 
decreases  and  consequently  our  rate  of  insurance. 

For  the  purpose  of  this  discussion  we  will  take 
say  12,000  hp.  as  our  normal  flow.  We  now  should 
make  up  a  series  of  tables  showing  the  number 
of  cubic  feet  per  second  which  would  have  to  be 
added  each  day  to  the  river  to  raise  the  horsepower 
of  the  stream  from  12,000  to  15,000  hp.,  from 
12,000  to  17,000  to  20,000  to  25,000,  etc.,  according 
to  the  amount  of  power  it  is  desired  to  produce. 

Knowing  the  height  of  the  fall,  from  these  tables 
is  readily  calculated  the  amount  of  steam  power 


56         HYDRO-ELECTRIC  DEVELOPMENTS. 

which  must  be  held  in  reserve  to  bring  the  existing 
horsepower  of  the  river  up  to  the  above  figures, 
if  steam  is  to  be  used  as  the  auxiliary. 

Reservoirs:  The  general  conformation  of  the 
country  along  the  river  may  be  such  that  it  is 
either  impossible  or  utterly  prohibitive  on  account 
of  the  cost  to  construct  a  reservoir  or  series  of 
reservoirs.  Upon  the  height  of  the  fall  which  we 
get  at  the  site  of  the  proposed  development  and 
the  manner  of  variation  of  flow  of  the  stream  will 
largely  depend  how  much  money  can  be  spent  for 
reservoirs.  If  it  is  possible  to  build,  reservoirs 
successfully  we  must  know  how  much  it  will  cost 
to  construct  these  per  horsepower  of  development. 

Steam  Power  Auxiliary:  The  tables  which 
were  prepared  showing  the  number  of  cubic  feet 
which  it  was  necessary  to  add  to  the  flow  of  the 
stream  in  order  to  produce  the  various  horsepowers 
which  we  were  investigating,  also  showed,  as  al- 
ready pointed  out,  the  capacity  of  the  apparatus 
which  would  be  necessary  to  supplement  the  river 
flow.  It  may  not  be  possible  of  course  to  build  a 
supplementary  power  plant  at  the  site  where  the 
water  power  development  is  to  be  made,  but  we 
will  consider  that  some  satisfactory  place  may  be 
found  where  coal  can  be  brought. 

At  such  a  place  as  may  be  chosen  we  must  figure 
what  it  wTill  cost  to  build  a  power  house  to  supply 
3,000  hp.;  5,000  hp.;  8,000  hp.;  13,000  hp.; 
in  order  to  supplement  the  river  flow.  We  may 
find  upon  making  estimates  that  these  installations 
would  be  at  the  rate  of  $100  per  hp.  Taking  in- 


PRIMARY  AND  SECONDARY  POWERS.       57 

terest,  depreciation  and  taxes  at  12  per  cent,  per 
year  this  would  make  a  charge  of  $12  per  hp. 
per  year. 

Now,  as  to  the  operation  of  the  plant  we  must 
make  up  a  calculation  showing  what  it  will  cost 
per  horsepower  per  year  to  furnish  our  auxiliary 
supply.  An  inspection  of  the  load  curves  will 
probably  show  that  a  power  house  shift  will  have 
to  work  nearly  8  hours  per  day  during  the  low 
flow  months  to  handle  the  peak  load.  Assuming 
this  period  was  60  days,  the  station  wages  per  hp. 
of  station  rating  will  probably  not  be  far  from  $4 
per  year  per  hp.,  or  66  cents  for  two  months. 

The  coal  per  horsepower-hour  for  this  character 
of  load  will  probably  be  high  and  may  average  from 
three  to  five  Ibs.  The  repairs  will  average  some- 
where about  $2  per  hp.  per  year  or  33  cents  for 
two  months.  The  coal  would  probably  figure  4 
(Ibs.)  x  8  (hours)  x  60  (days)  or  1920  pounds  for 
two  months.  This  should  be  multiplied  by  the 
average  percentage  of  a  horsepower  which  was 
in  use  during  8  hours  say  75  per  cent.  This  equals 
1440  Ib.  or  0.72  of  a  ton,  at  $4  per  short  ton  amounts 
to  $2.88  for  the  coal. 

Summing  up  these  figures: 

Labor  per  hp.  for  2  months 0.66 

Repairs 0.33 

Coal 2.88 

Other  expenses 0.10 


Total..  ..3.97 


58         HYDRO-ELECTRIC  DEVELOPMENTS. 

Adding  the  fixed  charges  of  $12,  the  total  cost  of 
the  auxiliary  power  is  $15.97  per  horsepower-year. 
If  it  is  fair  to  assume  that  money  invested  in 
such  a  business  is  worth  about  6  per  cent.  If  we 
capitalize  $3.97  upon  this  basis  it  is  equivalent  to 
investing  $66.16  per  hp.,  to  produce  the  reserve 
with  which  to  supplement  the  river  flow.  In 
addition  to  this  amount  we  must  add  the  $100  per 
hp.  for  plant,  making  a  capital  expense  per  hp. 
of  $166.16. 

Although  this  figure  looks  very  large  to  spend 
on  auxiliary  apparatus  per  hp.,  yet  it  is  very  likely 
that  the  cost  of  making  the  actual  hydraulic  de- 
velopment exclusive  of  the  generating  machines 
may  not  differ  very  much  for  12,000  hp.  or  25,000 
hp.  So  that  by  supplementing  the  power  by  a 
relatively  small  auxiliary,  working  only  a  fraction 
of  the  total  year,  a  very  much  increased  amount 
of  power  can  be  sold  at  a  fair  rate. 

We  must  now  prepare  a  table  showing  what  it 
costs  to  develop  theoretical  horsepowers,  including 
reservoirs  or  steam  auxiliaries.     Thus: 
12,000  hp.  cost  per  hp.  $A 
15,000    "         "       "      "     $B 
17,500    "        "       "      "      $C 
20,000    "        "       "      "      $D 
25,000    "        "       "      "      $E 

In  the  final  chapter  of  this  book  will  be  discussed 
the  methods  of  choosing  which  one  of  these  de- 
velopments we  should  adopt  so  that  the  cost  per 
horsepower  will  not  exceed  the  amount  which  we 
can  afford  to  invest. 


CHAPTER  IX. 
CAPITAL  COSTS. 

Since  we  have  made  an  extended  examination 
of  the  costs  of  producing  energy  in  different  quan- 
tities in  the  districts  which  we  desire  to  serve,  we 
should  be  able  to  make  fairly  accurate  estimates 
of  the  amount  of  business  we  can  obtain  at  rates 
which  will  yield  a  satisfactory  return  upon  the 
investment.  The  building  up  of  a  power  business 
is  at  best  somewhat  slow  and  our  estimates  should 
consequently  err  on  the  conservative  side. 

The  next  table  which  should  be  prepared  should 
be  under  the  assumption  that  the  power  com- 
pany is  to  supply  all  the  profitable  business  which 
it  can  take  at  a  definite  price.  The  table  would 
appear  somewhat  as  follows: 

TABLE  I. 

X  Horsepower  @  $A  per  hp.  = 
Y  "  @  $B      V   " 

Z  "  @  $C      "     " 

etc.,  etc. 

Average  price  received  per  horsepower-year  =  $ 
If  the  rates  which  have  been  estimated  will  get 
the  business  are  not  likely  to  be  lowered  in  future, 
the  above  table  gives  us  a  fair  indication  of  the 
business  which  the  power  company  can  eventually 
do. 

We  cannot  expect  to  take  all  this  business  as 
59 


60         HYDRO-ELECTRIC  DEVELOPMENTS. 

soon  as  the  water  power  installation  is  complete 
but  every  preparation  should  be  made  for  obtaining 
it  as  soon  as  possible.  At  the  time  the  work  of 
construction  is  begun,  a  force  of  solicitors  and 
contract  agents  must  be  organized  and  sent  into 
tHe  field.  The  duty  of  these  men  is  to  begin  ne- 
gotiations for  supplying  electric  energy  and  the 
closing  of  all  contracts  which  can  be  made.  The 
time  set  for  taking  on  the  business  must  be  such 
that  even  if  the  work  were  delayed  as  usually  is 
the  case  there  will  be  no  risk  of  endangering  our 
contracts. 

Contracts  cannot  probably  be  closed  with  the 
smaller  customers  but  the  "  missionary  "  work 
must  be  all  done  so  that  they  may  be  secured  as 
soon  as  the  plant  is  ready.  A  system  should  be 
organized  by  which  all  the  information  gained 
during  the  visits  of  the  agents  will  be  systemati- 
cally recorded.  One  of  the  most  simple  methods 
is  the  use  of  a  card  catalogue  upon  which  all  the 
data,  under  the  proper  headings,  is  written.  A 
reference  number  may  be  placed  upon  the  card 
which  refers  to  more  detailed  information,  such  as 
the  results  of  engine  and  power  tests,  etc.  A  set 
of  tables  of  obtainable  business  based  upon  the 
information  secured  by  the  contract  agents  and 
showing  the  probable  results  of  the  first  four  years 
•  of  operation  should  be  now  prepared. 

The  operating  costs  can  be  approximately 
estimated  from  the  information  given  in  the  pre- 
vious chapter  in  discussing  the  various  classes  of 
service. 


CAPITAL  COSTS.  61 

The  results  of  the  estimates  may  show  that  the 
cost  of  making  the  development  is  such  that  the 
operation  of  the  plant  for  the  first  year  or  so,  will 
not  meet  all  charges,  but  the  number  of  horse- 
power secured  by  contract  may  be  such  as  to 
warrant  every  expectation  of  meeting  all  the 
interest  charges  within  a  reasonable  time. 

The  deficit  in  interest  charges  while  the  plant 
is  in  partial  operation  is  really  in  the  nature  of  a 
capital  charge  and  of  course  must  be -provided 
for  in  the  capital  requirements. 

The  results  of  our  examinations  show  that  the 
average  price  which  the  power  company  will  re- 
ceive for  energy  at  the  end  of  the  fourth  year 
will  be,  we  will  say,  $35  per  hp-yr. 

An  analysis  of  the  nature  of  business  engaged 
in  may  show  the  following: 

Per  horse- 
power year. 

Estimated  average  cost  of  demand $  6.00 

"      "    supply 5.00 

Total $11.00 

This  leaves  net  earnings  of  $24  per  horsepower 
year.  If  we  place  the  fixed  charges  at  the  follow- 
ing amounts  as  previously  explained: 

Interest  upon  investment 5.5  per  cent. 

Depreciation  due  to  change  in  art  and 

advancement  of  science 1.5  per  cent. 

Insurance  fund 1.0  per  cent. 

Repairs  upon  plant 1.0  per  cent. 

9.0  per  cent. 


62         HYDRO-ELECTRIC  DEVELOPMENTS 

We  find  that  $266  is  the  capital  sum  which  will 
permit  earnings  of  $24  at  the  rate  of  9  per  cent. 
The  estimates  may  show  that  four  years  will 
elapse  before  the  plant  will  earn  its  interest  charges 
while  probably  not  more  than  one-half  the  capital 
will  be  invested  or  not  earning  during  this  period, 
we  must  make  an  allowance  for  this  fact.  Con- 
sidering money  worth  6  per  cent,  in  the  construc- 
tion period,  the  loss  of  interest  will  amount  to  one 
half  of  24  'per  cent,  or  12  per  cent.  If  we  deduct 
12  per  cent,  from  $266,  there  remains  $234  which 
figure  it  is  near  enough  to  consider  is  the  average 
amount  of  money  that  can  be  paid  per  horsepower 
of  development.  This  sum,  of  course,  represents 
one  horsepower  delivered  at  the  customer's  prem- 
ises. Since  there  are  numerous  losses  which  take 
place  between  the  customer  and  the  power  at  the 
falls,  the  figure  now  derived  must  be  modified  to 
take  account  of  the  facts.  Without  going  into  the 
technical  side  of  the  question  and  speaking  very 
broadly,  a  turbine  wrorking  under  average  condi- 
tions, has  an  efficiency  of  from  70  to  90  per  cent. 

There  are  moreover  losses  in  the  dynamos 
amounting  to  a  small  amount.  If  we  take  the 
combined  efficiency  of  a  dynamo  and  turbine  as 
85  per  cent.,  we  probably  shall  be  correct  enough 
for  commercial  purposes.  The  transmission  line 
will  probably  be  designed  to  have  no  greater  loss 
than  5  per  cent.  The  sum  of  the  losses  in  the  step 
up  and  down  transforms  in  commercial  operation 
may  be  taken  at  about  5  per  cent.  When  an 


CAPITAL  COSTS.  63 

electric  light  company  undertakes  to  distribute 
electric  energy  among  many  small  customers  it 
has  been  found  that  much  the  same  thing  takes 
place  that  happens  in  the  case  of  a  gas  or  water 
company.  Namely,  there  is  a  difference  between 
the  number  of  units  leaving  the  plant  and  those 
paid  for  by  the  customer.  The  horsepower-hours 
which  the  station  meter  shows  have  been  generated 
are  often  5  to  15  per  cent,  more  than  the  amount 
paid  for  by  the  customers,  the  loss  varying  with 
the  condition  of  the  plant  and  the  kind  of  business 
transacted.  Since  the  plant  will  be  new  and  the 
business  one  of  wholesale  rather  than  retail,  let 
us  take  this  loss  at  5  per  cent.  The  sum  of  all  the 
losses  indicated  above  amounts  to  approximately 
30  per  cent. 

That  is,  1.43  horsepower  at  the  falls  is  approxi- 
mately equivalent  to  one  horsepower  delivered  to 
the  customer.  The  number  of  horsepower  sold 
is  consequently  very  different  from  the  number 
which  it  is  necessary  to  provide  at  the  falls.  For 
instance  the  figure  $234  per  hp.,  the  estimated 
amount  of  money  which  one  can  pay  to  be  able 
to  deliver  one  horsepower  to  the  customer,  is  re- 
duced by  30  per  cent.,  so  that  the  amount  of  money 
which  is  available  for  expenditure  in  terms  of  horse- 
power at  the  falls  is  about  $163.00. 

It  frequently  happens  that  the  development  of 
a  water  power  can  be  best  made  in  stages,  that 
is  in  partial  developments.  If  the  first  develop- 
ment were  considered  by  itself  it  may  happen  that 


64         HYDRO-ELECTRIC  DEVELOPMENTS. 

the  cost  per  unit  horsepower  would  be  so  high  that 
the  receipts  would  not  pay  all  the  charges.  Where- 
as by  considering  the  second  development  we  might 
find  that  the  average  cost  per  hp.  was  perfectly 
satisfactory.  The  question  to  be  considered  then 
resolves  itself  into  one  purely  of  time  before  the 
second  development  will  come  into  use,  and  the 
basis  of  estimate  outlined  above  may  be  used  with 
modifications  which  would  naturally  suggest  them- 
selves to  the  reader. 

The  figure  which  has  been  derived  by  this  cal- 
culation, namely,  the  amount  of  money  which 
we  can  afford  under  given  conditions  to  pay  to 
develop  a  horsepower  is  obviously  very  necessary 
to  know. 

In  applying  the  results  of  this  calculation  to 
any  development  in  figuring  the  average  cost  per 
horsepower-year  it  is  needless  to  point  out  that 
the  number  horsepower-year  used  is  the  number 
which  may  be  sold  and  not  necessarily  the  minimum 
flow  of  the  stream. 

We  have  seen  in  the  course  of  this  discussion 
that  the  amount  of  capital  which  may  represent 
each  horsepower- year  offered  for  sale  is  dependent 
upon 

1st.  The  yearly  rental  or  gross  revenue  which 
we  expect  to  receive  for  each  horsepower  rating 
of  machinery  installed. 

2nd.  The  cost  of  rendering  the  service. 

The  yearly  rental  which  we  can  obtain  is  de- 
pendent upon  the  cost  of  generating  energy  by  the, 
cheapest  method  applicable  to  the  locality  and 


CAPITAL  COSTS.  65 

the  number  of  hours  per  day  the  machinery  is  at 
the  customers  disposal. 

The  cost  of  rendering  the  service  depends  very 
largely  upon  the  character  of  the  business  en- 
gaged in. 

We  have  seen  that  one  of  the  important  ex- 
penses is  the  cost  of  demand.  The  cost  of  this 
service  is  as  would  be  expected  a  very  considerable 
amount  per  horsepower-year  for  lighting  and 
small  motors  and  decreases  per  horsepower  in 
proportion  to  the  size  of  the  units  supplied. 

The  cost  of  holding  auxiliary  machinery  in 
reserve  has  been  shown  and  also  the  items  entering 
into  the  cost  of  supply. 

The  net  revenue  which  remains  after  deducting 
all  expenses,  is  the  sum  of  money  which  must  pay 
the  interest  upon  the  capital  which  represents  each 
horsepower  and  also  provide  for  the  depreciation 
and  losses. 

The  investment  in  water  power  enterprises  is 
very  attractive  to  many  people  who  feel  that  there 
is  no  franchise  limitation  which  makes  the  business 
one  of  limited  duration,  and  that  as  time  elapses  it 
is  not  a  wasting  business  like  for  instance,  coal  and 
other  forms  of  mining  from  which  diminishing  re- 
turns must  be  considered.  While  there  still  remain 
in  this  country  coal  deposits  large  enough  to  last 
for  a  great  number  of  years,  yet  the  price  of  coal 
should  tend  to  advance  in  time  as  the  consumption 
increases  and  should  counterbalance  any  cheapening 
of  the  cost  of  manufacture  of  electric  energy  from 
coal  through  the  greater  perfection  in  apparatus. 


INDEX. 

Agreements  of  Vendor 6 

Agents,  Contract 60 

Capital — amount  per  horsepower 63 

Coal,  Consumption 23-40 

Charge,  Calander 44 

Dam,  Failure  of 11 

Dam,  Foundations  of 12 

Demand,  Cost  of 28-31-42 

Demand,  Cost  of  for  Small  Motors 46 

Demand,  Maximum 31-45 

Depreciation 22-29-43 

Development,  The  Best 11 

Electricity,  Storing  of 26 

Energy,  Cost  of  for  continuous  load 47 

Energy,  Cost  of  for  large  motors 47 

Energy,  Cost  of  for  small  motors 45 

Energy,  Cost  of  for  lighting 43 

Energy,  Cost  dependent  upon  hours  of  use 30-31 

Energy,  Sale  to  customers 41 

Energy,  Sale  to  Electric  Light  Companies 32-33-34 

Energy,  Sale  to  Street  Railways 36 

Energy,  Supplementary 49 

Engine,  Gas,  Oil,  Steam 13 

Engine,  Maximum  load  upon 19 

Expenses,  Division  of 27 

Expenses,  Miscellaneous 28 

Examination,  Electrical 9 

Examination,  Hydraulic 9 

Examination,  Legal 7 

Fall,  Height  of 2 

Flow  of  water  in  streams 9-51-52-53 

Flow,  Least 55 

Flow,  Yearly  variation  of 49-54 

Flow,  Normal : 55 

67 


INDEX. 


Flowage  rights 2 

Fund,  Sinking 22-29-43 

Gaugings,  Records  of 

Government  Reports 

Heating,  Steam 

Horsepower,  Cost  of  per  year 

Insurance,  Water  powers 

Land,  Purchased 

Load  Curve 34-36-42 

Load  Curve  Predicted 52 

Load  Curve  purchased  energy 34 

Load  Factor,  Definition  of 18 

Load,  Maximum 18-19-20 

Load,  Peak 15-31 

Market  Examination,  of 13-14 

Option,  Consideration  for 5 

Option,  Points  covered  in 6 

Peak  Load 15-31 

Plant,  Cost  of  small 21 

Plant,  Cost  of  operating  small 22 

Plant,.  Fixed  charges  upon 29-43 

Power  Firm 35 

Power  Supplementary 10 

Power  Used  in  Manufactures 16 

Power  Losses,  of 62 

Power,  Primary 49 

Power  Secondary, 49 

Power  Steam  Auxiliary 56 

Power  Plant  Advantages  over  small  producers 20 

Pondage  curve 53 

Property  offered  for  sale 2 

Reservoirs 56 

Solicitors 60 

Supply,  Cost  of 28 

Water  Fall 2 

Water  Shed,  extent  of 9 


UNIVERSITY   OF    CALIFORNIA 
LIBRARY 

This  is  the  date  on  which  this 
book  was  charged  out. 


26  1912 


YB  V6090 


A 


196480 


"V 


